What is an ETF?
An Exchange Traded Fund (ETF) is a an open ended fund traded on a stock exchange. Typically, the aim of an ETF is to:
Replicate the return of an underlying benchmark or strategy.
provide the same return as a specific index or asset class*.
ETFs offer investors access to a variety of asset classes at a relatively low cost and can be used as the building blocks of multi-asset portfolios. Investors can benefit from the broad diversification of an equity benchmark, gaining exposure to hundreds or thousands of individual securities in a single transaction.
Characteristics and benefits
LOW COST | Lower cost way to access diversified market exposure than an actively managed fund or buying a number of individual stocks. |
LISTED ON EXCHANGE | Shows exactly how your investment is performing. |
TRADE LIKE SHARES | Buying and selling as easily as shares any time the market is open, using normal brokerage accounts. |
LIQUID ASSET | ETFs are, in general, as liquid as the underlying asset that they hold. |
TRACKS THE UNDERLYING | Aims to provide the same return as underlying benchmark or asset. |
PROVIDES ACCESS | Offers investors access to a broad range of markets and asset classes. |
TAX EFFICIENT | Tend to have lower turnover than an actively managed fund, therefore realising less capital gains on buying and selling underlying assets. |
Why use an ETF?
FLEXIBLE | ETFs can be used to achieve numerous investment strategies. |
ACCESSIBLE | ETFs can be bought and sold at a known price whenever the stock exchange is open as prices are quoted throughout the day. |
COST-EFFECTIVE | ETFs provide a cost-effective way to gain diversification through a benchmark or exposure to assets previously difficult to access. |
TRANSPARENT | Unlike other investment vehicles, ETF constituents are published on a daily basis – this transparency makes it easier for the investor to see exactly what they own. |
SIMPLE | ETFs are listed and traded in a similar way as shares through the same brokers and platforms. |
*Before fees and expenses
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