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Investment choices: Exchange Traded Fund (ETF)

Date: 8 December 2016

What is an Exchange Traded Funds

An Exchange Traded Fund (ETF) is an investment fund traded on stock exchanges, much like shares. An ETF can hold assets such as shares, commodities or bonds. ETFs usually track the performance of an index, giving investors access to an instantly diversified portfolio. ETFs are open-ended funds, meaning investors have the flexibility to buy or sell shares at any time. The premise of an ETF is that you are buying into a selection of companies in one hit, rather than individually picking each company to invest in. The value of your investment is driven by the underlying asset value and general market sentiment.

What are the advantages of ETFs?

ETFs can be managed as a passive investment, which is cost effective and your returns will more than likely match the market. Alternatively using ETFs as part of an actively managed portfolio can assist with reducing costs and enhancing portfolio diversification. Finally ETFs are a good way to gain exposure to international shares and foreign currencies. For an investor looking to avoid volatility, the risk from currency movements needs to be understood before proceeding with an ETF. You should speak to a financial adviser to ensure your investment portfolio suits your requirements.

General Advice Warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.

 

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