What is an Exchange Traded Fund (ETF)
An ETF invests in a portfolio of shares which reflect a particular index (similar to a managed index fund). However, ETFs are bought and sold on a stock exchange.
Why invest in ETFs?
||By investing in ETFs your money is spread across a larger number of companies in just one trade - this provides greater diversification when making small investments.
|Reduced investment costs
||Because you only need one trade to invest in several companies, you pay just one brokerage fee.
|Ease of use
|| Trade ETFs just like shares. Use market, limit or stop orders, or use them in a CommSec Margin Loan.
||You gain exposure to an entire region, country or particular index through a single trade on the ASX.
||ETF providers publish holdings as often as daily, so you always know what you own.
|Access to funds
||Like a share purchase, whenever you’re ready to sell you can access your cash after T + 3 (the trade date plus three days).
Types of ASX ETFs
There are two main types of ETFs available through the ASX and overseas exchanges.
- Domestic ETFs - Provide exposure to Australian market indices.
- International ETFs - Provide exposure to established international market Indices.
You can also buy Exchange Traded Commodities (ETCs), which provide exposure to commodities rather than commodity companies, through CommSec.
How ETFs Compare to Shares and Managed Index Funds
This table summarises the benefits of ETFs over shares and unlisted managed funds.