An exchange-traded fund, or ETF, is a basket of securities (forming a fund) that trade like shares on major stock exchanges. The securities that make up an ETF can be varied. These may include stocks, bonds, commodities, or currencies.
An ETF may track the performance of a broad index, like the S&P 500, or it may track a specific country’s index or sector. They comprise some of the most liquid asset classes traded on the NYSE and are popular with institutional and retail traders.
Here are some of the most common types of ETFs available:
Equity ETFs
Bond/Fixed Income ETFs
Commodity ETFs
Currency ETFs
Speciality ETFs
Factor ETFs
Sustainable ETFs
Which ETF to invest in all depends on you; the level of risk you are prepared to take and the returns you want. As with any investment, you need to understand the risk-return ratio of every ETF, which is available in the fund offering documents which might help you decide which ETF can cater to your investment needs.
It’s important to know whether an ETF is actively or passively managed. Most are passively managed which means the fund manager is simply to ensure that the ETF tracks the specified index or asset. With an actively managed fund, they will aim to outperform a specified benchmark. ETFs generally have lower management fees that actively managed funds.
Dependant on your trading approach, they can be traded long term or short term and as CFDs as a way of accessing the opportunities as leverage.
Why trade ETF CFDS:
ETF CFDs enable you to trade with leverage, which means you only need a percentage of the notional value to open a position, reducing capital requirements. As such, you can increase the potential profit or loss from a trade. You can trade ETFs long or short, which means you can potentially profit from any price direction. It can also be very cost effective for active traders with low commission per trade.
Benefits:
Other things to consider:
There are advantages and other things to consider when trading ETF CFDs and it’s important for traders to take these into consideration before making an investment decision.
If you are interested there are 25 ETF CFDs available to trade on a GO Markets MT5 CFD account.
Disclaimer: Articles are from GO Markets analysts and contributors and are based on their independent analysis or personal experiences. Views, opinions or trading styles expressed are their own, and should not be taken as either representative of or shared by GO Markets. Advice, if any, is of a ‘general’ nature and not based on your personal objectives, financial situation or needs. Consider how appropriate the advice, if any, is to your objectives, financial situation and needs, before acting on the advice. If the advice relates to acquiring a particular financial product, you should obtain and consider the Product Disclosure Statement (PDS) and Financial Services Guide (FSG) for that product before making any decisions.
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