Exchange Traded Funds - ETFs - Passive Index Trackers
There are many types of ETFs being issued.
The most common are Passive Index Trackers.
Exchange Traded Funds (ETFs) are passively managed investment funds that track the performance of an underlying index. Almost anything you can do with a single share or stock you can do with an ETF share. Traditional funds (funds with units not listed on an exchange), typically only offer the opportunity to subscribe or redeem units at the Net asset Value (NAV) on each day, but an etf that is listed on an exchange, must be quoted continuously during exchange trading hours by its Market Makers. ETFs can be bought or sold via bank and broker. It’s important to check the ETF’s prospectus to ensure that there aren’t hidden charges or other potential issues.
- An easy means to achieve market performance
- Minimal tracking error at low cost
- Tight bid-offer spreads and daily liquidity
- Trade ETFs just like single stocks
- High transparency through daily published Index constituents
- Some exchanges require iNAVs.
- Cost effective alternative to traditional funds