Investing in ETFs
Investing in ETFs is an easy way to build your own investment portfolio. Unlike individual shares, ETFs offer exposure to a basket of stocks and bonds, which help to diversify your risk and reduce your chances of big losses if one of your investments tanks. However, just like other investments, ETFs come with fees and expenses. The most important ongoing costs are management fees from the ETF issuer and order fees for buying and selling on a stock exchange. These are deducted from your return and should be included in your budget planning. You should also be aware of potential taxes and how your ETF is structured. Some ETFs are physically-backed – the ETF holds the underlying assets, whereas others use derivatives to track an index or asset and are thus called synthetic ETFs. They can carry additional risks compared to physically-backed products because they depend on the integrity of the swap providers and the counterparties of the derivative contracts.
Best Investment Strategies for 2025 and Beyond
The Investors Centre choosing an ETF, consider its fees and taxes as well as the quality of the underlying assets it tracks. Some ETFs are actively managed by professional fund managers who try to outperform the market. Others are passively managed – they track an index and adjust their basket when the market changes. Some ETFs focus on a particular sector or company size, while others are structured around a particular theme or idea, like sustainable investing or a commodity like gold.