Exchange-traded funds (ETFs) are now 10 years old and are fast becoming an investment mainstay for private investors in the same way they have been increasingly popular in the City over the last decade.
The size of the market for these funds is huge - they have brought in nearly 647 billion pounds, mostly in the US. Although UK investors have been slower to take them up, the industry is now seeing ETFs as a key part of the investment landscape.
ETFs work in a similar way as tracker funds, in that they are shares whose underlying assets reflect a portfolio of a specific index or sector, usually the FTSE100 or the S&P500. Part of their attraction is that they offer the opportunity to get into asset classes that were previously only available to City institutions or extremely wealthy investors.
There has recently been increased interest in ETFs, with more funds and investors entering the market, and a greater awareness of their benefits, such as in shorting an index to take advantage of falling markets.
With the inherent difficulties of stock investing, and the transaction fees involved, the variety, flexibility and cheapness of ETFs make them more desirable. And, with new rule changes to end of commission-based payments coming into effect in a couple of years, ETFs are expected to become more popular.
ETFs becoming more popular for investors
ETFs becoming more popular for investors
Tue, 20 Apr 2010
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