Which type of ETFs primarily invest in the component securities of a specific index?

Index-based ETFs primarily invest in the component securities of a specific index, such as the S&P 500 or the NASDAQ-100. These ETFs aim to replicate the performance of the underlying index by holding the same securities in the same proportions as they are represented in the index. This investment strategy allows investors to gain exposure to a broad market or sector without having to buy each individual security separately.

Index-based ETFs are designed to follow a "passive" investment approach, which means they do not actively manage their portfolio but instead seek to match the index's performance. This often leads to lower fees compared to actively managed funds, making them a popular choice for investors looking for cost-effective ways to diversify their portfolios.

The other types of ETFs mentioned serve different purposes. Active ETFs employ a management strategy that involves making specific investment decisions about which securities to buy or sell to outperform the market, rather than simply tracking an index. Leveraged ETFs aim to achieve returns that are a multiple of the index's performance, often using financial derivatives, and can be quite volatile. Inverse ETFs are designed to generate returns that are opposite to the performance of a specific index, allowing investors to profit from market declines. Each of these has distinct objectives and strategies that differ from the