Exchange Traded Funds or ETFs for short, have become extremely popular over the last few years. They provide the investor easy access to an entire sector or index by trading one share of stock.

Simply, ETFs are constructed similar to a fund, but trade like an exchange traded stock. ETFs offer investors diversity, liquidity, focus, and transactional ease. These factors have led to the top 3 most traded U.S. stocks being ETFs and 5 of the top 10 most active U.S. stocks are ETFs.

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This article will provide a brief overview of the 6 primary ETF families so that you can choose which family and ETF best fits your strategy, outlook and investment objectives. The 6 ETF families are iShares, SPDRS, Rydex, Vanguard, ProShares, and PowerShares. Lets drill down into each of these unique ETF families.iShares The worlds largest ETF family is distributed by SEI Investments and a subsidiary of Barclays Bank serves as the advisor. They offer a wide palette of ETFs from bond funds, domestic and international indexes to targeted sectors like natural resources and technology. Literally, 100s of choices reside under the iShare umbrella. The most popular of these include the ^EEM^. ^IWM^. ^IYR^

and the ^EWJ^

Their latest and, some would argue, most interesting offerings include the S&P Target Date ETFs TZD, TZE, TZG, TZI, TZL, TZO, TZV ticker symbols. These include target dates 2010 through 2040 and a retirement income fund ticker symbol TGR.

SPDR Sector ETFs SPDRs stands for S&P Depository Receipts. The SPDR sector family is distributed by ALPS distributors and offers 9 distinct ETFs based on 9 sectors of the S&P 500. These sectors and ETFs include ^XLY^

^XLP^

^XLF^

^XLV^

^XLI^

^XLB^

^XLK^

and ^XLU^

Investors use SPDR ETF funds to target these specific sectors for diversification and asset allocation among other reasons. It is important to note that the ^SPY^

holds all 500 stocks in the S&P 500. It is the most active ETF.

Rydex This ETF family manages over 100 ETFs and mutual funds. They are primarily known for offering the first leveraged ETF to retail investors. Their ETFs are broken into sub categories such as Equal Weight which includes ^RYF^. ^RPV^

^XLG^

and ^RSU^

Rydex is unique in offering ETFs based on currencies. These Currency Shares include the ^FXA^

Vanguard A giant investment firm headquartered in suburban Philadelphia. Their ETFs are a share class of 20 of their domestic and international stock index funds and 4 of their bond funds. Examples include European, ^VGK^

Growth, ^VUG^

and what I find to be the most interesting, Dividend Appreciation, ^VIG^

ProShares The worlds largest provider of short and leveraged ETFs. They offer 76 different types of ETFs and are distributed by SEI Investments. Short or inverse means you are betting against the upward movement of the underlying. One invests in inverse ETFs if they believe the underlying sector or index is heading down. Examples of inverse ETFs include ^DOG^

and ^PSQ^

Leveraged ETFs means that each point in the underlying is reflected 2x in the ETF share. A simple example would be the ^QLD^

Every point the PSQ

moves, QLD moves 2 points in the corresponding direction.

PowerShares Underwritten by Invesco, this family is perhaps the most unique of the ETF groups. They offer XTFs which are ETFs but based on, what Invesco calls an intellidex or intelligent index rather than a static index, as the other ETF families. These intellidexes are dynamic, quantitative, rule based stock groups. Examples include ^PQZ^. ^PMA^

and ^PSR^

They also offer commodity ETFs such as ^DBL^

and ^DBO^

In addition to specialized ETFs like ^PBP^

David Goodboy is Vice President of Business Development for a New York City based multi-strategy fund. Read his blog at marketsurfer.com .