Exchange Traded Funds

An ETF, or exchange-traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors.

Trading an ETF gives you the ability to better diversify across a range of assets usually with exposure to the same or similar factors. If, for example, you are interested in having an exposure to gold, you might choose an ETF to suit which covers most aspects of investing into multiple gold companies.

An ETF might be employed to lower the risk of holding an individual asset or security in a particular industry or exposure to a particular set of influences.

ETFs can also be used as hedging tools i.e. holding an ETF with positive exposure to a downside move in a particular index or asset class. Holding such an ETF can help to offset downside risk held within a share portfolio.

Your CharterMarkets adviser can tell you more and advise the appropriate timing for taking on an ETF in your investment portfolio.

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