Exchange-Traded Funds (ETFs)

Get insights and ideas on choosing ETFs for your portfolio.

What is an ETF?
ETFs - or exchange-traded funds - are investment funds that can be traded on stock exchanges in the same way as shares. Investing in ETFs is a way to track a broad basket of stocks using an index, such as the S&P 500 or FTSE 100. Investors can also track a wide range of other asset classes such as bonds, property and currencies. To invest in commodities such as metals, energy and agriculture, investors can use ETCs – exchange-traded commodities – which work much the same way.

 

An exchange-traded fund (ETF) is a type of pooled investment security that operates much like a mutual fund. Typically, ETFs will track a particular index, sector, commodity, or other assets, but unlike mutual funds, ETFs can be purchased or sold on a stock exchange the same way that a regular stock can.

Why do people invest in ETFs?

ETFs are a simple way to invest in a wide range of companies without picking individual shares. However, unlike an active fund or trust, ETFs are usually 'passively managed'. This means they track a predefined index of stocks, rather than trying to beat the market. As a result, ETFs usually have much cheaper fees. Another benefit is that ETFs are traded on stock exchanges, meaning they can be bought and sold quickly throughout the day. Other types of funds can take longer to appear in your account.