What To Know About ETFs

American Century Investments ETFs


Anytime you are looking to make a big purchase—whether it is a car or an investment product—it's important to know "what's under the hood." When it comes to exchange-traded funds (ETFs), a good place to start is understanding how they compare to more familiar mutual funds. 


Compare ETFs and Mutual Funds

Although ETFs and mutual funds share many similarities, an ETF is a different investment vehicle with distinguishing features that may offer investors more ways to potentially save money over time. Let’s take a look at ETFs' 1) tax advantages, 2) trading flexibility and 3) lower fees compared to mutual funds.

When you’re ready to take your knowledge to the next level, access our in-depth insights on ETFs.



How ETFs May Make You More Money Over Time

Tax Advantages

Why ETFs Are More Tax Efficient

Building a secure financial future involves keeping more of what you earn. And a critical success factor is effectively managing your tax burden. 

An ETF is bought and sold from one investor to another on an exchange as an in-kind trade, which means ownership of the ETF changes hands without directly selling the underlying stocks or other securities. This type of transaction, along with the mechanics of how ETF shares are issued and redeemed, typically results in fewer capital gains.

In contrast, when you liquidate mutual fund shares, the fund manager may have to sell underlying securities in a cash transaction. This may result in realized capital gains that are taxable for all shareholders in the fund—not just the ones selling their shares.


Take It to the Next Level

Understanding the Tax Efficiency of ETFs
How the tax advantages of ETFs help investors keep more of what they invest.

Managing Taxes With Loss Harvesting and ETFs
Tax-loss harvesting lets you use the losses of one investment to offset gains in another. Learn how it may help reduce your tax bill.


Trading Flexibility

Why ETFs Give You More Trading Flexibility

The primary difference between mutual funds and ETFs is how they are bought and sold.

  • The price of a mutual fund’s shares is calculated once per day, after the market closes. Everyone who places a trade that day receives that price, whether buying or selling.
  • ETFs, like individual stocks, are priced continually throughout the trading day on an exchange. You get the price, whether buying or selling, at the time you place your order.

ETFs that cover major asset classes and markets can usually be bought and sold relatively quickly at current prices.

However, just like purchasing stocks, you may pay a commission and/or brokerage fee for ETF trades. 


Take It to the Next Level

Liquidity of ETFs: Exploring the Different Levels
ETFs have different layers of liquidity that allow investors to trade ETFs in amounts that can far exceed an ETF’s average daily volume without significantly affecting the ETF’s price.

Trading ETFs in Volatile Markets: 4 Key Tips
Keep these four key tips in mind when implementing ETF investment decisions during periods of market volatility.


Lower Fees

Why ETFs Have Lower Fees Than Mutual Funds

Even with commissions and other brokerage costs, ETFs generally have lower expense ratios than mutual funds because there is less administrative and management work associated with them.

For example, purchases and sales of mutual funds take place through the mutual fund company. With ETFs, the fund company is not involved in purchases and sales since transactions occur among investors on the exchange. This difference helps reduce ETF operating costs.


Take It to the Next Level

Getting Started With ETFs
Understand the pluses and minuses of ETFs and how they differ from mutual funds.



At a Glance: How ETFs Compare to Mutual Funds and Stocks

ETFs Combine Characteristics of Mutual Funds and Stocks


  Mutual Funds ETFs Stocks
Trade on Exchange  
Priced Throughout Trading Day  
Management Fees  
Bid/Offer Spread  
Commissions*  
Diversification Opportunity  

 

*Most retail broker dealers have reduced commissions to zero. Please consult your broker dealer on specific fees.


Next Steps

Selecting the right investments for your portfolio depends on your goals, time horizon and personal preferences. That’s why we designed our ETFs to meet a variety of investors’ needs. 

Our lineup includes a full range of ETFs that help you seek better outcomes across market cycles. And you can combine them with mutual funds and individual stocks and bonds to customize your portfolio.


Review a Short List of American Century ETFs

ETF Ticker Benchmark Description # of Holdings Style Expense Ratio
Large Cap
Focused Dynamic Growth ETF1,2,4 FDG Russell 1000 Growth Index Offers a concentrated portfolio of large-cap growth companies with long-term capital appreciation potential. 30-45 Growth 0.45%
STOXX U.S. Quality Growth ETF2,3 QGRO Russell 1000 Growth IndexA Seeks to provide more consistent exposure to U.S. growth companies by emphasizing stable growers as well as high-growth companies. 150-300 Growth 0.29%
Sustainable Growth ETF1,2,5,6 ESGY Russell 1000 Growth Index Seeks to deliver competitive long-term financial returns by using a growth U.S. equity strategy that integrates environmental, social and governance factors into the investment process. 70-90 Growth 0.39%
Sustainable Equity ETF1,2,5 ESGA S&P 500 Index Seeks to deliver competitive long-term financial returns while integrating material environmental, social and governance factors into the investment process. 80-100 Blend 0.39%
Avantis U.S. Equity ETF*,16 AVUS Russell 3000 Index Invests in a wide set of U.S. companies of all market capitalizations believed to have higher expected returns. 1,000+ Blend 0.15%
STOXX U.S. Quality Value ETF2,3 VALQ Russell 1000 Value IndexB Offers the potential for equity market returns with less volatility by emphasizing attractively valued companies as well as consistent dividend payers. 150-300 Growth 0.29%
Mid Cap
Mid Cap Growth Impact ETF1,2,5,6 MID Russell Midcap Growth Index Focuses on identifying a concentrated portfolio of high-quality companies with sustainable long-term growth and positive social impact. 20-40 Growth 0.29%
Small Cap
Avantis Small Cap Value ETF*,12,16 AVUV Russell 2000 Value Index Invests in a wide set of U.S. small-cap companies believed to have higher expected returns. 500+ Value 0.15%
ETF Ticker Benchmark Description # of Holdings Style Expense Ratio
Large Cap
Quality Diversified International ETF2,10 QINT MSCI World ex USA Index Seeks to enhance core international exposure by emphasizing both high-quality value and growth companies with a portfolio of 300-500 stocks. 300-500 Blend 0.39%
Small Cap
Avantis International Small Cap Value ETF*,10,16 AVDV MSCI World ex USA IMI Index Invests in a wide set of non-U.S. developed small-cap companies believed to have higher expected returns. 500+ Value 0.36%
All Cap
Avantis Emerging Markets Equity ETF*,10,13,16 AVEM MSCI Emerging Markets IMI Index Invests in companies of all market capitalizations, across emerging markets countries, sectors and industries, believed to have higher expected returns. 1,000+ Blend 0.33%
Avantis International Equity ETF*,10,13,16 AVDE MSCI World ex USA IMI Index Invests in a wide set of non-U.S. developed markets companies of all market capitalizations believed to have higher expected returns. 1,000+ Blend 0.23%

ETF Ticker Benchmark Description # of Holdings Style Expense Ratio
Taxable Fixed Income
Avantis Core Fixed Income ETF*,12,13,14,16 AVIG Bloomberg U.S. Aggregate Bond Index Invests in a broad set of investment-grade debt obligations across sectors, maturities and issuers. Approx. 500 Intermediate Term 0.35%
Diversified Corporate Bond ETF2,16 KORP Bloomberg U.S. Intermediate Corporate Bond Index Provides an intermediate-term, investment-grade corporate bond portfolio that invests opportunistically up to 35% in high yield. 125-175 Intermediate Term 0.29%
Multisector Income ETF2,9,10,12,13,16 MUSI Bloomberg U.S. Aggregate Bond Index Seeks to deliver high levels of current income and attractive risk-adjusted returns through a diverse portfolio consisting of investment-grade, high-yield, securitized and emerging markets debt securities. 150-200 Intermediate Term 0.35%
Select High Yield ETF2,9,10,13,16 AHYB ICE BofA US High Yield Constrained (BB-B) Index Actively invests primarily in BB and B-rated debt issues in pursuit of high current income and risk-adjusted returns. 100-200 Intermediate Term 0.45%
Tax-Exempt
Diversified Municipal Bond ETF2,9,11,13,16 TAXF S&P National AMT-Free Municipal Bond ETF Provides an intermediate-term, investment-grade national municipal bond portfolio that invests opportunistically between 5% and 35% in high-yield municipals, including unrated bonds. Up to 400 Intermediate Term 0.29%
Avantis Core Municipal Fixed Income ETF*,10,11,12,13,14,16 AVMU S&P National AMT-Free Municipal Bond Index Invests in a broad set of investment-grade municipal debt obligations. Approx. 1,000 Intermediate Term 0.15%

ETF Ticker Benchmark Description # of Holdings Style Expense Ratio
Convertible Bond
Quality Convertible Securities ETF2,6,7,16 QCON ICE BofA Convertible Index Seeks to capitalize on the deficiencies inherent in the construction of passive indices to deliver outperformance with better risk management. 80-200 - 0.32%
Preferred Security
Quality Preferred ETF2,6,8,16 QPFF ICE Exchange-Listed Preferred & Hybrid Securities Index Offers a diversified portfolio of preferred securities seeking high, sustainable dividends and attractive risk-adjusted returns. 100-200 - 0.32%
Real Estate
Avantis Real Estate ETF*,10,15,16 AVRE S&P Global REIT Index Designed to provide diversified exposure to global real estate securities believed to have higher expected returns. 100-300 Blend 0.17%

    

 

1ESGA, ESGY, FDG, MID: These ETFs are different from traditional ETFs. Traditional ETFs tell the public what assets they hold each day. This ETF will not. This may create additional risks for your investment.

  • You may have to pay more money to trade the ETFs' shares. These ETFs will provide less information to traders, who tend to charge more for trades when they have less information.
  • The price you pay to buy ETF shares on an exchange may not match the value of the ETF's portfolio. The same is true when you sell shares. These price differences may be greater for these ETFs compared to other ETFs because it provides less information to traders.
  • These additional risks may be even greater in bad or uncertain market conditions.
  • MID, ESGY and ESGA will publish on their website each day a "Proxy Portfolio" designed to help trading in shares of the ETF. While the Proxy Portfolio includes some of the ETF's holdings, it is not the ETF's actual portfolio.

The differences between these ETFs and other ETFs may also have advantages. By keeping certain information about the ETFs secret, these ETF may face less risk that other traders can predict or copy its investment strategy. This may improve the ETFs' performance. If other traders are able to copy or predict the ETFs' investment strategy, however, this may hurt the ETFs' performance.

For additional information regarding the unique attributes and risks of these ETFs, see the additional risk discussion at the end of this material.

    

3iSTOXX® and STOXX® are registered trademarks of STOXX Ltd.

*Avantis Investors: Backed by American Century Investments®, Avantis Investors adds another diversified investment capability powered by financial science to expand the breath of ETF solutions for the benefit of clients.

AETF seeks to track the iSTOXX® American Century® USA Quality Growth Index
BETF seeks to track the iSTOXX® American Century® USA Quality Value Index


We Are Here To Help

Want more information on investments or have questions you need answered now? Take advantage of our expertise by calling us at 800-345-2021.

Log in to your brokerage account to trade American Century® ETFs commission free or open an account today.


Financial Advisors

Talk to an ETF Specialist.
Call 833-ACI-ETFS

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Go to ETF Overview


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Exchange Traded Funds (ETFs) are bought and sold through exchange trading at market price (not NAV), and are not individually redeemed from the fund. Shares may trade at a premium or discount to their NAV in the secondary market. Brokerage commissions will reduce returns.

 
2The full names of these funds are as follows:
AHYB: American Century Select High Yield
ESGA: American Century Sustainable Equity
ESGY: American Century Sustainable Growth
FDG: American Century Focused Dynamic Growth
KORP: American Century Diversified Corporate Bond
MID: American Century Mid Cap Growth Impact
MUSI: American Century Multisector Income
QCON: American Century Quality Convertible Securities 
QGRO: American Century STOXX U.S. Quality Growth
QINT: American Century Quality Diversified International
QPFF: American Century Quality Preferred 
TAXF: American Century Diversified Municipal Bond
VALQ: American Century STOXX U.S. Quality Value

Expected Returns: Valuation theory shows that the expected return of a stock is a function of its current price, its book equity (assets minus liabilities) and expected future profits, and that the expected return of a bond is a function of its current yield and its expected capital appreciation (depreciation). We use information in current market prices and company financials to identify differences in expected returns among securities, seeking to overweight securities with higher expected returns based on this current market information. Actual returns may be different than expected returns, and there is no guarantee that the strategy will be successful.

4FDG: 

The fund is an actively managed ETF that does not seek to replicate the performance of a specified index.

This fund may invest in a limited number of companies, which carries more risk because changes in the value of a single company may have a more significant effect, either negative or positive on the fund's value.

Because the shares are traded in the secondary market, a broker may charge a commission to execute a transaction in shares, and an investor also may incur the cost of the spread between the price at which a dealer will buy shares and the somewhat higher price at which a dealer will sell shares.

The Verified Intraday Indicative Value:
 Unlike traditional ETFs, the fund does not tell the public what assets it holds each day. Instead, the fund provides a verified intraday indicative value (VIIV), calculated and disseminated every second throughout the trading day by the Cboe BZX Exchange, Inc. (Listing Exchange) or by market data vendors or other information providers. It is available on websites that publish updated market quotations during the trading day, by searching for the fund's ticker plus the extension .IV, though some websites require more unique extensions. For example, the VIIV can be found on Yahoo Finance (https://finance.yahoo.com) by typing "^FLV-IV" (for Focused Large Cap Value ETF) in the search box labeled "Quote Lookup." The VIIV is based on the current market value of the securities in the fund's portfolio on that day. The VIIV is intended to provide investors and other market participants with a highly correlated per share value of the underlying portfolio that can be compared to the current market price. The specific methodology for calculating the fund's VIIV is available on the fund's website.

Portfolio Transparency Risk:
 The VIIV is intended to provide investors with enough information to allow for an effective arbitrage mechanism that will keep the market price of the fund's shares trading at or close to the underlying net asset value (NAV) per share of the fund. There is, however, a risk, which may increase during periods of market disruption or volatility, that market prices will vary significantly from the underlying NAV of the fund. Similarly, because the fund's shares trade on the basis of a published VIIV, they may trade at a wider bid/ask spread than shares of ETFs that publish their portfolios on a daily basis, especially during periods of market disruption or volatility, and therefore, may cost investors more to trade. Although the fund seeks to benefit from keeping its portfolio information secret, some market participants may attempt to use the VIIV to identify the fund's trading strategy, which if successful, could result in such market participants engaging in certain predatory trading practices that may have the potential to harm the fund and its shareholders.

Early Close / Trading Halt Risk:
 Trading in fund shares on the Listing Exchange may be halted in certain circumstances. Trading halts may have a greater impact on the fund than traditional ETFs because of its lack of transparency. An extended trading halt in a portfolio security could exacerbate discrepancies between the VIIV and the fund's NAV.

Authorized Participant / Authorized Participant Representative Concentration Risk:
 The fund issues and redeems shares in Creation Units to Authorized Participants. The creation and redemption process for the fund occurs through a confidential brokerage account (Confidential Account) with an agent, called an AP Representative. The fund may have a limited number of institutions that act as Authorized Participants and AP Representatives, none of which are obligated to engage in creation or redemption transactions. The fact that the fund is offering a novel and unique structure may affect the number of entities willing to act as Authorized Participants and AP Representatives. During times of market stress, Authorized Participants may be more likely to step away from this type of ETF than a traditional ETF.

5MID, ESGA, ESGY: 

Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

The fund is an actively managed ETF that does not seek to replicate the performance of a specified index.

Proxy Portfolio Risk:
The goal of the Proxy Portfolio is to track closely the daily performance of the Actual Portfolio. The Proxy Portfolio is designed to reflect the economic exposures and the risk characteristics of the Actual Portfolio on any given trading day.

  • ETFs trading on the basis of a published Proxy Portfolio may exhibit wider premiums and discounts, bid/ask spreads, and tracking error than other ETFs using the same investment strategies that publish their portfolios on a daily basis, especially during periods of market disruption or volatility. Therefore, shares of the fund may cost investors more to trade than shares of a traditional ETF.
  • Each day the fund calculates the overlap between the holdings of the prior Business Day's Proxy Portfolio compared to the Actual Portfolio (Proxy Overlap) and the difference, in percentage terms, between the Proxy Portfolio per share NAV and that of the Actual Portfolio (Tracking Error).
  • Although the fund seeks to benefit from keeping its portfolio information secret, market participants may attempt to use the Proxy Portfolio to identify a fund's trading strategy, which if successful, could result in such market participants engaging in certain predatory trading practices that may have the potential to harm the fund and its shareholders.

Premium/Discount Risk: Although the Proxy Portfolio is intended to provide investors with enough information to allow for an effective arbitrage mechanism that will keep the market price of the fund at or close to the underlying net asset value (NAV) per share of the fund, there is a risk (which may increase during periods of market disruption or volatility) that market prices will vary significantly from the underlying NAV of the fund.

Trading Issues Risk:
 Trading halts may have a greater impact on this fund compared to other ETFs due to the fund's nontransparent structure.

Authorized Participant Concentration Risk:
Only an authorized participant may engage in creation or redemption transactions directly with the fund. The fund may have a limited number of institutions that act as authorized participants. The fact that the fund is offering a novel and unique structure may affect the number of entities willing to act as Authorized Participants. During times of market stress, Authorized Participants may be more likely to step away from this type of ETF than a traditional ETF.

When portfolio managers incorporate Environmental, Social and Governance (ESG) factors into an investment strategy, they consider those issues in conjunction with traditional financial analysis. When selecting investments, portfolio managers incorporate ESG factors into the portfolio's existing asset class, time horizon, and objectives. Therefore, ESG factors may limit the investment opportunities available, and the portfolio may perform differently than those that do not incorporate ESG factors. Portfolio managers have ultimate discretion in how ESG issues may impact a portfolio's holdings, and depending on their analysis, investment decisions may not be affected by ESG factors.

6MID, ESGY, QCON, QPFF: 

The fund is classified as non-diversified. Because it is non-diversified, it may hold large positions in a small number of securities. To the extent it maintains such positions; a price change in any one of those securities may have a greater impact on the fund's share price than if it were diversified.

7QCON: 

Convertible securities are typically bond or debt securities and preferred stock that may be converted into a prescribed amount of common stock or other equity security of the issuing company at a particular time and price. The value of convertible securities may rise and fall with the market value of the associated common stock or, like a debt security, vary with changes in interest rates and the credit quality of the company issuing the bond or security. A convertible security tends to perform more like a stock when the associated common stock price is high relative to the conversion price and more like a debt security when the associated common stock price is low relative to the conversion price.

8QPFF: 

Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities may receive preferential treatment compared to common stock regarding dividends, but they are typically subordinated to a company's other debt which subjects them to greater credit risk. Generally, holders of preferred securities have no voting rights. A company issuing preferred securities may defer dividend payments on the securities and may redeem the securities prior to a specified date. Preferred securities may also be substantially less liquid than other securities and may have less upside potential than common stock.

Floating rate securities are structured so that the security's coupon rate or the interest paid on a bond fluctuates based upon a reference rate. In a falling interest rate environment, the coupon on floating rate securities will generally decline, causing a reduction in the fund's income. A floating rate security's coupon rate resets periodically according to the terms of the security. In a rising interest rate environment, floating rate securities with coupon rates that reset infrequently may lag behind the changes in market interest rates. Floating rate securities may also contain terms that impose a maximum coupon rate the company issuing the security will pay, therefore decreasing the value of the security.

Concentrating investments in a particular industry or group of industries gives the fund greater exposure than other funds to market, economic and other factors affecting that industry or group of industries. The financials sector can be significantly affected by changes in interest rates, government regulation, the rate of defaults on corporate, consumer and government debt, and the availability and cost of capital.

9AHYB, MUSI, TAXF: 

The lower rated securities in which the fund invests are subject to greater credit risk, default risk and liquidity risk.

10AHYB, AVDE, AVDV, AVEM, AVMU, MUSI, QINT: 

International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks.

11AVMU, TAXF: 

Investment income may be subject to certain state and local taxes and, depending on your tax status, the federal alternative minimum tax (AMT). Capital gains are not exempt from state and federal income tax.

12AVIG, AVMU, AVUV, MUSI: 

Derivatives may be more sensitive to changes in market conditions and may amplify risks.

13 AVIG, AVDE, AVEM, MUSI, AHYB, TAXF, AVMU:

Generally, as interest rates rise, the value of the securities held in the fund will decline. The opposite is true when interest rates decline.

14 AVMU:

Credit quality ratings on underlying securities of a fund are obtained from three Nationally Recognized Statistical Rating Organizations ("NRSROs"), Standard & Poor's, Moody's and Fitch. Ratings are converted to the equivalent Standard & Poor's rating category for purposes of presentation. For municipal funds, each security is assigned the highest rating provided by the NRSROs. A "non-rated" designation is assigned when a public rating is not available for a security. This designation does not necessarily indicate low credit quality. The letter ratings are provided to indicate the credit worthiness of the underlying bonds in the portfolio. Long-term ratings generally range from AAA (highest) to D (lowest). Includes payable amounts related to securities purchased but not settled at period end. Due to rounding, these values may exceed 100%.

15 AVRE: 

This fund may be subject to many of the same risks as a direct investment in real estate. These risks include changes in economic conditions, interest rates, property values, property tax increases, overbuilding and increased competition, environmental contamination, zoning and natural disasters. This is due to the fact that the value of the fund's investments may be affected by the value of the real estate owned by the companies in which it invests. To the extent the fund invests in companies that make loans to real estate companies, the fund also may be subject to interest rate risk and credit risk.

16 AHYB, AVIG, AVDE, AVDV, AVEM, AVMU, AVUS, AVRE, AVUV,  KORP, LVOL, QCON, QPFF, TAXF, AEMB, and MUSI:

This fund is an actively managed ETF that does not seek to replicate the performance of a specified index. To determine whether to buy or sell a security, the portfolio managers consider, among other things, various fund requirements and standards, along with economic conditions, alternative investments, interest rates and various credit metrics. If the portfolio manager considerations are inaccurate or misapplied, the fund's performance may suffer.

The STOXX® Index is the intellectual property (including registered trademarks) of STOXX Limited, Zurich, Switzerland ("STOXX"), Deutsche Börse Group or their licensors, which is used under license. The fund is neither sponsored nor promoted, distributed or in any other manner supported by STOXX, Deutsche Börse Group or their licensors, research partners or data providers and STOXX, Deutsche Börse Group and their licensors, research partners or data providers do not give any warranty, and exclude any liability (whether in negligence or otherwise) with respect thereto generally or specifically in relation to any errors, omissions or interruptions in the STOXX® Index or its data.

Exchange Traded Funds (ETFs): Foreside Fund Services, LLC - Distributor, not affiliated with American Century Investments Services, Inc.

You should consider the fund's investment objectives, risks, charges and expenses carefully before you invest. The fund's prospectus or summary prospectus, which can be obtained by visiting avantisinvestors.com or by calling 1-833-928-2684; for American Century products visit americancentury.com. This content contains this and other information about the fund and should be read carefully before investing.