What are ETFs?
Exchange Traded Funds (ETFs) trade on the stock exchange like individual shares. They can provide you exposure to a wide range of companies, assets or industries in one simple investment. ETFs are often constructed with investments that follow an index or a specific theme, for example an ETF may track the ASX200 and invest in the top 200 companies listed on the ASX or they may choose to follow a theme such as Technology and invest in companies in that industry or sector, or they may choose to invest in Corporate Bonds.
How do I invest in ETFs?
ETFs are traded on the stock exchange like shares. To buy ETFs you need to use the services of a ‘broker’ to complete the actual transaction of buying or selling shares. A broker can be a person who physically places and registers trades on your behalf or a digital platform.
Things to consider when it comes to ETFs
ETFs are generally invested with a particular theme i.e. Aussie Top 200 companies, Healthcare, Tech, Emerging markets or track an index and they do not offer you as an individual investor, choice in what companies or assets to invest into.
It’s important to understand the associated risks such as market risk (ETF values can fluctuate), liquidity risk (buying and selling can be hard during volatile periods), performance risk (returns may differ from the underlying index).
