Exchange Traded Funds -or ETFs for short -are a simple, low cost and flexible way to access the potential rewards of the stock market.
Quite simply, ETFs combine the advantages of index tracking funds and exchange-traded shares - giving you access to an entire stock market index in a single share.
Some of the key features of ETFs are outlined below:
Diversity in a single share
The ability to track an index has long been recognised as a valuable way to diversify against risk, but one previously available only through collective investments schemes such as Unit Trusts. ETFs give you all the diversification of an index-tracker in a single, easily traded share.
Competitive costs With typical annual management fees of less than 0.5%, ETFs can give your investments a head start compared to other managed funds. Also, ETFs don't attract stamp duty, at the time of purchase and just like Unit Trusts, they can be wrapped in tax-efficient vehicles like PEPs and ISAs.
There are currently 10 ETFs available to investors in the UK. You can gain access to global investment indices such as the UK FTSE 100 or the S&P 500 (a US index).
iFTSE Euro 100
iFTSE Eurotop 100
Standard & Poor's Indices
iShare S&P 500
Dow Jones STOXX Indices
iShares DJ Euro STOXX 50 LDRS
iShares DJ STOXX 50 LDRS
Fixed Income ETFs
iShares GS $ InvesTop Corporate Bond Fund
iBoxx € Liquid Corporate Fund
iBoxx £ Corporate Bond Fund
Easy to buy and sell You can buy and sell ETFs during market hours and just like ordinary shares all transactions are through your broker or IFA. Prices can be checked in the Financial Times, or real time and 15 minute delayed prices can be viewed on line. (See the Investing section of this website for free price data.)