ETF FAQs: Simplified

Our FAQs provide a ready reckoner on the pros and cons of Exchange Traded Funds.

ETF FAQs

What are ETFs?

ETFs are pools of securities (stocks, bonds) traded on stock exchanges. Much as you buy shares on the Australian Securities Exchange (ASX).

The minimum investment in an ETF is $500.

They come in two main types:

  • Passive: Track the performance of a specific index (e.g., S&P/ASX 200).
  • Active: They follow a particular investment strategy chosen by a fund manager.

Trading ETFs:

  • Open a trading account with a broker.
  • Buy/sell ETFs like shares throughout the trading day.
  • Settlement takes 2 business days (T+2).

Domestic Exposure:

  • Many ETFs track domestic ASX indices.
  • Or have active fund managers with an investment strategy.

International Exposure:

  • Some ETFs track established international market indices.
  • These offer exposure to global, regional, and single-country markets.

Liquidity Risks:

  • ETFs may be illiquid at times, impacting trade execution.

Dividends/Distributions:

Fees:

  • ETFs typically have lower management fees than managed funds.
  • Passive ETFs have lower still total fees than Active ETFs.
  • Brokerage/advisor fees may apply when trading.

Sustainable and Green ETFs:

Some ETFs focus on carbon neutrality and sustainable practices.

Additional Resources:

  • Prospectus
  • Issuer Websites

 

Disclaimer

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