What are Exchange Traded Funds?

Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.

The basics

An ETF is an open-ended collective investment scheme that is traded on one or more exchanges. The aim of an ETF is to track the performance of a specific index, such as the FTSE 100 or S&P 500; in other words, to generate the same return, less fees.
Like a fund
Like a fund
an ETF gives access to a portfolio of company shares, bonds or other asset classes, such as commodities or property.
Like shares
Like shares
ETFs are bought and sold on exchange.

Consequently, ETFs combine the diversification of an investment fund with the tradability of a share.

From stock and bond markets, to commodities and property, there are ETFs which track indices made up of virtually all major asset classes. You can use ETFs to invest in your home market, globally, or in a specific country or region. There are ETFs covering most sectors, from technology and telecommunications to clean energy and consumer goods, as well as bonds issued by governments and companies in developed and emerging markets.

Risk. Diversification and asset allocation may not fully protect you from market risk.

Key features

ETFs offer a combination of features which may enable and aid all types of investors to build and manage their investments.
Access
ETFs enable a variety of broad and targeted exposures across virtually all asset classes, regions, sectors and specialties.
Cost effective
ETFs are typically lower cost than other comparable investments, such as actively managed funds, as the management fees incurred tend to be cheaper.
Transparency
Information on holdings, performance and costs is published daily and freely available.
Diversification
ETFs offer access to multiple investments in a given index, in one transaction, helping investors to spread risk.
Flexibility
ETFs are traded on exchanges, like company shares, making it simple to, buy or sell any time markets are open.

Risk. Diversification and asset allocation may not fully protect you from market risk.
Risk. There can be no guarantee that the investment strategy can be successful and the value of investments may go down as well as up.

The variety of available ETFs mean that you could

 

What are ETFs Icon What are ETFs Icon What are ETFs Icon What are ETFs Icon
invest in a single
ETF as a core
exposure to
complement your
portfolio
fine tune your
preferred
exposure in a
particular region,
commodity or
asset class
build an entire
investment
portfolio at a
lower cost using
ETFs
create a solid,
relatively
inexpensive core
to your portfolio
releasing capital
for more active
investing

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