Exchange Traded Funds (ETFs) could be an option if you're looking for a more flexible, economic and transparent way to invest in a broad range of funds. They offer the convenience of an index fund and the flexibility of traditional sharedealing - combined with relatively low fees.
The value of investments (and any income received from them) can fall as well as rise and you may not get back what you invested. For some investments this can also happen as a result of exchange rate fluctuations as shares and funds may have an exposure to overseas markets.
Remember, stock market investments should be viewed as a medium-term to long-term investment (at least five years).
ETFs are a portfolio of securities managed by an investment adviser or manager just like a traditional fund manager, and they can track a wide variety of indices ranging from FTSE 100 to the MSCI Brazil Index. However unlike traditional indices, they generally offer lower fees than traditional mutual funds and let you trade them any time the stock market is open.
By investing in a number of UK listed ETFs you could spread your wealth across many different companies and industries - offering a diversified approach to your investment. However, there are still risks associated with this type of investment as you will be investing in one country or particular market. For more details on the risks of investing in Exchange Traded Funds, refer to “What are the risks of investing in Exchange Traded Funds?” below.
|Show or hide What do I need to do to get started?|
|Show or hide What are the costs involved?|
|Show or hide What's the difference between ETFs and a Tracker fund?|
|Show or hide What are the risks of investing in Exchange Traded Funds?|
|Show or hide What to do next|
|Point of comparison||Index Tracker Fund||Exchange Traded Fund|
|Where do I buy it?||From fund promoter||On exchange via broker or Over The Counter(OTC)|
|Are distributors paid commission?||Yes,it is paid out of the annual management charge||No commission is paid|
|When can I buy and sell my holding?||At the valuation point, typically once a day||At any time the exchange is open|
|Can I see the price at point of trading?||No. The price you buy and sell at will be the price calculated at the next valuation point after your application has been processed||The price quoted is the price you pay|
|Can I see what is in the portfolio||Typically the top 10 holdings are published in a monthly fact sheet||Full portfolio published and updated daily|
|How much do I need to invest?||A minimum investment limit will apply||A single share|
|What is the structure of the fund?||Mostly UCITS*, unlisted||Mostly UCITS*, listed|
*UCITS stands for Undertakings for Collective Investments in Transferable Securities. This is the European regulatory framework for an investment vehicle that can be marketed within all countries that are a part of the European Union.
You should be aware of the following risks associated with investing in ETFs.
ETFs can be backed by either physical securities or in some cases synthetic securities. Physically backed ETFs hold the actual assets in the index they are tracking. Synthetically backed ETFs, on the other hand, use complex instruments such as derivatives issued by a counter party to generate their performance. Physically backed ETFs is the default approach taken by most ETF providers. When investing in an ETF, please be aware of the risks associated with investing in synthetically backed ETFs and that the value of ETFs may rise or fall.
Some ETFs only buy a representative sample of the assets in the index they are tracking. This may mean that the performance of the ETF will not match exactly the index they are tracking. This difference is often referred to as "tracking errors".
Some issuers of ETFs may be domiciled outside of Britain or the US where they may be subject to less regulation.
Once you have completed the online Sharedealing application, please wait for confirmation that your account is open before sending in any share certificates or applying for a Stocks and Shares ISA.
It normally takes 2-6 weeks to transfer shares into your nominee account.
To join our Sharedealing Service you will also need to open a first direct 1st Account, our current account.
You can also talk to us on:
telephone 0800 24 24 24
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