ETFs have transformed modern investing. They offer real-time trading, tax efficiency, and built-in transparency — all within a single, flexible vehicle.

Unlike stocks, ETF shares can be more dynamic. Their supply can expand or contract based on demand, and this process helps keep the market price of an ETF close to its net asset value, (or NAV).

When demand rises, Authorized Participants — usually large financial firms or brokers — deliver baskets of underlying securities to the issuer. In return, new ETF shares are created and added to the market.

Conversely, if demand falls or if the market price increases beyond its NAV, Authorized Participants can return ETF shares to the issuer and receive the underlying securities back. Removing supply from the market without disrupting other investors.

This creation and redemption process increases liquidity, and because it is done “in-kind”, it can minimize capital gains for investors.

It’s the engine that powers WisdomTree ETFs’ flexibility and efficiency.

Learn more at WisdomTree.com/ETF-Education