What is an ETF │ Education

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

an ETF gives access to a portfolio of company shares, bonds or other asset classes, such as commodities or property.

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.

Key features

ETFs offer a combination of features which can enable and aid all types of investors to build and manage their investments.

Flexibility

ETFs are traded on exchanges, like company shares, making it simple to, buy or sell any time markets are open.

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.

Diversification

ETFs offer access to multiple investments in a given index, in one transaction, helping investors to spread risk.

Access

ETFs enable a variety of broad and targeted exposures across virtually all asset classes, regions, sectors and specialties.

Transparency

Information on holdings, performance and costs is published daily and freely available.

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


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

What are Exchange Traded Funds?

The basics

Key features

The variety of available ETFs mean that you could