The exchange-traded fund (ETF) industry has seen tremendous growth, adoption and innovation
since its inception in the 1990s. Since then, ETFs have become the preferred investment vehicle for
many investors. Here are five reasons why ETFs might be right for you:
Flexibility
The ETF universe today covers a diverse range of exposures across asset classes, regions, investment styles and themes. This broad offering makes ETFs great building blocks for a well-diversified portfolio, providing investors with a powerful tool to select core and satellite holdings to suit their individual investment goals. With the added ability to quickly and efficiently adapt their positioning, investors can easily adjust the weights of their core, satellite or cash holdings and also take on tactical positions to complement their long-term allocations.
Accessibility
ETFs are listed on one or more stock exchanges and traded just like company shares meaning they can be traded as long as the relevant stock exchange is open.
Cost Efficiency
Most ETFs track an index with predefined rules which determine the composition of the underlying securities and the timing and manner of periodic rebalances. This often makes ETFs cheaper than actively managed mutual funds or investment trusts. Investors should always consult the product documentation such as the Key Information Document (KID) for a full breakdown of fees and charges.
Transparency
ETF providers publish the list of underlying constituents and associated weights for each of their ETFs on a daily basis. This means that investors can see exactly what they own as well as the effects of periodic rebalancing. In the context of a wider portfolio this allows an investor to see how their underlying holdings interact across multiple investment products allowing them to better manage gaps and overlaps.
Liquidity
ETFs can be traded intraday and source liquidity from their underlying constituents. The least liquid constituent of an ETF determines the ETF’s overall liquidity.
Important information
Capital at risk. The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. ETF costs also apply.
This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance.
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