What is an ETF? A Guide to Exchange-Traded Funds

An ETF, or Exchange-Traded Fund, is a type of investment fund that allows investors to buy and sell a collection of shares like an individual stock. They track the performance of an underlying index or asset class, such as stocks, bonds, or commodities.

For example, if you buy an ETF that tracks the ASX 200, you are buying a share of the 200 largest companies in Australia. 

If you buy a banking ETF, Like MVB (VanEck Australian Banks ETF), you are buying a share that holds all of the major banking shares on the Australian stock market

Benefits of ETFs

-They offer diversification: By investing in an ETF, you can gain exposure to a broad range of assets or a specific asset class without having to invest in each individual security. This can help to mitigate risk and reduce volatility.

-They are cost-effective: ETFs typically have lower fees than actively managed funds, which can save you money over the long term. index funds have particularly low fee structures

-They are liquid: ETFs are traded on stock exchanges, so they can be bought and sold at any time during trading hours. This makes them more flexible than other types of investments, such as mutual funds.

-They offer transparency: ETFs are required to disclose their holdings daily, so you always know exactly what you’re invested in.

If you’re thinking about investing in ETFs, it’s important to understand how they work and what the risks and benefits are. Speak to your adviser today about how ETFs could fit into your portfolio.

History of ETF’s on the ASX

For a detailed look at the history of ETF’s on the Australian stock market, check out 20 years of ETFs Here