July 30, 2014

Exchange Traded Funds

Exchange Traded Funds or ETFs act as pooled funds that are traded on global stock exchanges in similar fashion to stocks and shares. They first launched in the United Kingdom during 2000. An ETF could be considered as a compromise between a standard tracker fund and more flexible shares.

ETFs are essentially shares that are traded on the stock exchange, whose assets reflect the price movements of a sector, commodity or portfolio of an index. They are similar to a tracker fund, but a key difference is an ETF is a share which can be traded at any point during the day, whereas a fund can be traded at just one point of the day. Differences also exist with respect to charges. While a a tracker fund is subject to initial and annual management charges, an ETF only requires the initial commission of a stockbroker and no stamp duty.