Exchange Traded Funds explained

An ETF refers to something called an Exchange Traded Fund, and this is something that is fairly new to come to the market.

What this is is really a portfolio of different securities, which means that they may not all be shares but could be other investment products such as bonds too, and this is a portfolio of securities in the exchange traded fund product that tracks the performance of a given market index.

The result of this as you can readily see is simply that you can have the flexibility of trading something as though it were a share, but what you are doing is tracking the index.

So rather than buying a share in an individual company on the index, if you are interested in the index as a whole and how the price will move, you get to in a sense buy the ability to trade the index as a share instead.

Exchange traded funds can also be included in ISAs, and they are traded on the exchange.

In addition to Exchange Traded Funds, another product is called ETC which here stands for Commodities, and as you can now guess this refers to the ability to get access to all sorts of commodities through one product: things like gold and livestock.

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Exchange Traded Funds explained

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