Exchange Traded Funds (ETFs)

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What is an ETF?

Exchange Traded Funds (ETFs) are investment funds which hold a pool of securities such as shares, bonds, and commodities. ETFs trade similarly to when you purchase or sell ordinary shares with the same brokerage rates applying and are traded on the Australian Securities Exchange (ASX) and Cboe Australia available through our Netwealth Share Trading website.

ETFs provide investors an opportunity to trade in a cost-efficient manner while improving diversification and exposure through investing in a range of asset classes such as shares, property, and fixed interest.

ETFs can be structured to track specific investment goals for a particular index, sector, strategy, theme, or commodities allowing for greater trading flexibility.

Benefits

  • Cost effective: Potentially cost effective than buying the equivalent portfolio of shares and typically have lower fees than managed funds.
  • Diversification: a single trade may provide instant exposure to a diversified portfolio of securities.
  • Control: build your own portfolio across sector, country and/or asset class.
  • Simplicity: invest in various markets through a single trade.

Risks

  • Asset values: ETFs are closely tied to the performance of the underlying asset they track. If the value of the underlying asset falls, the value of the ETF will also fall.
  • Foreign currency volatility: some ETFs with exposure to international assets may carry added currency risk.
  • Geopolitical risks: political situations in the home country of the market or benchmark could impact the value of the ETF’s assets.
  • Asset classes: ETFs utilising synthetic investments or derivatives to replicate investment performance may carry additional risks and/or losses.

All Exchange Traded Fund products available on the website can be identified through the ‘ETF’ label on searches made.

It is also important to read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) from the ETF issuer before deciding whether to invest.

This information is intended to provide information for educational purposes only and is subject to change at anytime without notice.

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