What are ETFs?
What are ETFs? If you want to know what exactly is ETF, you must read this article.
What are ETFs?
Exchange Traded Funds (ETF) have revolutionized the way investors conduct their investment portfolios. ETFs are simple, flexible, cost-effective and offer the possibility of spreading the risk. These benefits are the cause of ever-increasing popularity of ETFs among the most demanding investors, ranging from private banks, through pension funds, government organizations, professional managers and private investors around the world.
An ETF is a ready investment, like a traditional investment fund, it can be bought and sold on the stock exchange, just like shares. For investors, this means combining the advantages of diversification offered by investment funds with the flexibility and transparency offered by shares.
What distinguishes ETF funds from traditional investment funds?
Traditional investment funds are actively managed, which aims to achieve better results than the results of stock exchange indices. However, history shows that there is a statistically rare case where a given fund regularly achieves better results than the index result. Regardless of the management effects, a management fee is always collected, which is quite a lot, on average it is an annual cost of 3%.
ETF funds were created in 1993. These funds are managed passively and also can be managed actively. This means that their management is limited to the funds mapping the results of the selected stock market index. Their goal is to provide investors with the results generated by the index, neither more nor less. We have a huge selection of funds here: funds for a selected country, small cap capital funds, dividend company funds, Emerging Markets funds, commodity funds, there is a lot to choose from. Management costs here range from 0.15 to 0.4% most often.
Maximum transparency of the investment
The investment in ETF is 100% transparent. The costs, results and current composition of the fund are transparent. information on individual funds can be found directly on the pages of its issuer. There are information such as: the investment policy of the fund, the current composition on a sectoral basis, a list of individual fund shares, results.
Who is issuing ETF funds?
The most popular issuers include: Lyxor, iShares, PowerShares, SPDR, and HSBC. Investors certainly know the company Black Rock well, this company emits ETF funds for the iShares brand.