What are ETFs?

Exchange-Traded Funds (ETFs) are flexible and increasingly innovative in the panel of investment solutions offered for investors. ETFs are essentially funds that trade on an exchange consisting of a basket of stocks, bonds, or other assets. Due to their advantages such as quick diversification, low costs, and easy trading, ETFs have gained the trust of investors across the globe. In this guide, we provide a brief overview of ETFs to help you become more familiar with this investment vehicle.

For a while, Mutual funds were the most commonly bought fund product; however, ETFs are increasingly popular in both personal and professional investment portfolios. The question is therefore not if, or when, ETFs will take over mutual funds but rather how the convergence between the two will materialize. It is now widely accepted that ETFs are the solution of choice when it comes to innovation and new launches.

ETFs are cheaper than mutual funds and offer greater trading flexibility since they can be traded on exchanges throughout the trading day. Additionally, ETFs often have lower expenses and minimum investment requirements, making it easier for smaller investors to participate in the markets. They are also easy products to use for strategic and tactical asset allocation. ETFs are ideal for investors seeking diversification since they contain multiple securities. They can be bought and sold as easily as shares.

ETFs have evolved from a simple concept to more sophisticated products. They represent an incredible opportunity to rethink the value proposition delivered to investors who are hungry for investment purpose. Investors can evaluate their performance to target a specific theme, sector or even a particular ESG/SDG strategy to invest sustainably. Find out more on Thematic investing and on ESG Investing.