An Exchange-Traded Fund (ETF) is a type of investment fund that can be bought and sold on a stock exchange in the same way that company shares are traded.
Like a share, an ETF has an offer price and a bid price, which fluctuate during the trading day. The money you put into an ETF will be invested in a range of assets, depending on the aims of the fund.
There is a wide choice of ETFs, defined, for example, by the types of assets they hold (bonds, shares, currencies etc.), or by the areas they cover (e.g. geographical regions or industry sectors).
ETFs often track a specific index, but some are actively managed, meaning that the fund managers follow their own investment strategies.
Holding ETFs can diversify your portfolio because, within their remits, they will be invested in a wider range of assets than an ordinary investor could cover.
Since ETFs are traded as stock market shares, you can buy or sell your holding easily during trading hours. Also, ETFs are exempt from stamp duty.
ETFs tend to charge lower fees than other comparable funds, although you may have to pay stockbroker fees to trade them.
The value of investments can fall as well as rise, and this article is not intended as financial advice. Hartey Wealth Management offers investment planning in Cheshire and Shropshire, and we would be happy to discuss the advantages and disadvantages of ETFs and other collective investments that might be appropriate for your portfolio.
