What are ETFs?

An Exchange Traded Fund (ETF) is an investment vehicle which is constructed like an open-ended collective investment scheme and trades like an individual security on a stock exchange. They are perhaps best thought of as a mutual fund/stock hybrid.

ETFs are passive index tracking instruments with low annual management fees or total expense ratios (TERs).  ETFs are designed to track their benchmark index as closely as possible.

Why should investors be looking at ETF's?

ETFs provide investors with a variety of benefits over traditional mutual funds including:

  • Lower expenses: typical expenses range from 0.01% to 0.25% p.a.
  • Transparency: Most ETFs disclose on a daily basis the exact holdings of the funds so you always understand precisely what you own and what you are paying for.
  • Very close tracking of the index.

ETFs cover a broad span of asset classes, from UK, US, Asian or European equitiy indexes or bond indexes to more exotic choices like emerging markets, clean energy or commodities.

In essence, ETFs provide the building blocks to produce tailored investment portfolios. For example a portfolio of equities and fixed interest securities will include investments across global markets and ETFs enable portfolios to include specific markets at very low costs.

We do not see these funds as a replacement to actively managed funds but rather to compliment them by being used as the base building blocks of a clients portfolio.

If you would like more information on how ETF's would compliment your portfolio please call us now on 01604 832932.

We offer ETF's from the following providers: DBX-trackers, iShares, HSBC ETF, Lyxor and ETF securities.

There are also hybrid funds that operate in the ETF sector from Evercorp Pan Asset which are designed to work within a risk framework, for example a balanced growth fund that will only invest in ETF's.  This means the asset allocation is handled for you but the fund costs normally associated with discretionary management is much lower.  

If you would like to see how ETF's can compliment your portfolio or would just like more information please give us a call.   

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