Frequently Asked Questions
What is an ETF?
- Exchange Traded Funds (ETFs) are portfolios of stocks, bonds or in some cases other investments that trade on a stock exchange just like a share. ETFs are generally classified as either indexed or actively managed:
- Indexed ETFs aim to correspond with the performance of a particular index (such as the S&P/ASX 50).
- Actively Managed ETFs are based on a particular investment strategy, so their underlying investments are chosen by the fund manager according to that strategy.
- Exchange Traded Commodities (ETCs) are a type of ETF that provide exposure to a commodity such as gold, rather than to commodity companies.
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How do you trade an ETF?
ETFs have an open-ended structure, which allows units to be bought and sold as investors enter or exit the fund. An ETF’s price is valued throughout the trading day like a share, and it can be bought or sold with the same T+3 settlement times as shares.
To start trading ETFs listed on the ASX, all you need is a CommSec trading account. If you don't already have an account, just follow the steps below:
Setting up a new CommSec trading account
- Join Now to open a CommSec account. Setting up a CommSec trading account is simple - and free!
- Once your account is open, login with your Client ID/Account Number and Password and navigate to 'Trading. Enter the code of the ETF you want to trade in the 'Code' field & click on 'Get Quote'. View available ASX ETF codes.
- Once you have selected the ASX ETF code, you are now ready to trade.
If you already have a CommSec trading account
- Visit commsec.com.au and login using your Client ID/Account Number and Password, click on ‘Trading’ located on the main navigation.
- Enter the code of the ETF you want to trade in the ‘Code’ field & click on ‘Get Quote’. View available ASX ETF codes.
- Once you have selected the ASX ETF code, you are now ready to trade.
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Do ETFs offer exposure to domestic ASX indices?
Yes. There are domestic ETFs traded through the ASX that track domestic ASX indices. One provider is State Street Global Advisors (SSgA), who launched the world's first ETF in partnership with the American Stock Exchange. Another issuer of ETFs is Vanguard Investments with an ETF over the ASX 300.
Each of their funds, listed on the ASX, tracks a Standard & Poors Australian Index, offering investors cost-effective and immediate exposure to domestic markets.
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What Liquidity risks exist within ETFs?
Investors in ETFs and ETCs may be subject to liquidity risk, the risk of an illiquid market at the time they wish to trade. Due to the size, number of shareholders and the turnover of the Australian ETFs, there is currently no Market Making requirements in these ETFs.
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Do ETFs provide dividends/distributions?
An ETF will change in value as the underlying portfolio of assets changes and may provide income for investors through distributions.
Currently*, ETFs listed on the ASX are not hedged for currency risk. Investors have exposure to foreign exchange rate of currency conversion and exposure to the price level of the relevant underlying equity portfolio. For information on currency risk see the product disclosure statement, prospectus or equivalent disclosure document, available from the issuer of the ETF.
*As of January 21, 2011.
ETFs are typically able to achieve lower operating costs, so the management fees within the ETFs/ETCs are usually lower than those for managed funds. Lower management fees can enhance investor returns. Brokerage or an adviser fee may apply when buying or selling an ETF, just like shares. For information on fees see the product disclosure statement, prospectus or equivalent disclosure document, available from the issuer of the ETF.
There are different types of ETFs created by various issuers. International Indexed ETFs listed on the ASX track an established international market index, providing either exposure to global, regional and single country markets.
Yes. If the relevant ETF is on the CommSec Margin Lending approved securities list, you can purchase it on your margin loan.
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