Once upon a time, someone created the very first ETF. It was designed to track the performance of the S&P 500, providing investors with long-term growth potential with ample diversification to hedge risk. Today, investors can choose from a range of products to match their long-term growth objectives and investment preferences. From broad global-market ETFs that hold hundreds, if not thousands, of securities to more concentrated ETFs that focus on a sector, specialty asset or consumer trend.

From high-yield funds to bolstering risk management in your portfolio, domestic and international fixed income product options, as well as other ETFs designed to generate income, are readily available to retail investors. For those focusing investment strategies specifically toward generating income, there are even some ETFs that use advanced strategies like buying and writing options (an investment contract in which a fee is paid for the right to buy or sell shares at a future date) to help investors generate income and meet their goals.

Certain ETFs may be useful for people looking to preserve their capital. Money market (a market for highly liquid assets generally maturing in one year or less), Treasury (debt obligation issued by the U.S. government with payments of principal and interest backed by the full faith and credit of the U.S. government) and short-term fixed income ETFs are just a few of the options investors can choose from which may help to preserve capital.

As more investors enter the market and gain experience, the need for more sophisticated strategies has become more mainstream. An increasing number of ETFs are rising to that challenge of offering investors the benefits of alternative investments that align with differentiated strategies. These ETFs seek to provide absolute return potential in any market and can be used as core investments or complementary additions to a portfolio for most investors.

Volatility may be the most important factor in dictating a portfolio’s worth over time. For example, dividend-based ETFs may help mitigate volatility because dividends help boost returns during bear markets; although this does come at the risk that companies may lower or stop their dividend. Treasury and fixed income ETFs may also help lower portfolio volatility as they typically track assets that are historically more stable, both in price and consumer confidence.

ETFs are classified a certain way by the IRS. Cool, so what does that mean? That means ETFs can be effective tools for tax-loss harvesting—using the losses in one investment to offset the gains in another for tax planning purposes. In short, because the IRS does not consider ETFs to be “substantially identical” to mutual funds, ETFs can be used to maintain exposure in a specific area of the market and may capture losses for tax purposes. Note: We are not tax advisors, those seeking tax advice should consult an independent tax advisor.