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ETFs explained

I keep hearing about ETFs as being good for small or novice investors. What are they and are they safe?

An Exchange Traded Fund (ETF) is a portfolio of shares or securities and is made using an index of some kind. They are traded on the Australian Securities Exchange and can be accessed just like buying a share.

The goal of an ETF is to have a return like the underlying index. Off that will come a fee, which tends to be on the small side compared to normal investment funds.

Companies like Vanguard have ETFs and they say they deliver two sets of benefits to investors: the trading speed and flexibility of shares merged with the low cost, diversification of index funds. This has made ETFs one of the fastest growing investment solutions in the world today, with hundreds of billions of dollars now invested globally using ETFs.

With these products you are index investing, but you have the trading and pricing flexibility advantages of individual shares, which means you can basically buy and sell throughout the trading day.

There’s great info on Vanguard’s and ASX's websites.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Friday, January 22, 2010

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