ETF Education

What is an ETF?

Trading ETFs

When to trade ETFs

Who will benefit the most from trading ETFs?

How are ETFs traded?

History of ETFs

 

What is an ETF?

ETF stands for Exchange Traded Funds. An ETF tracks the performance of underlying asset classes, such as an index, a basket of stocks, bonds or commodities. They can be bought and sold on an exchange and represent a collection of securities, so they give investors the possibility to track the performance of a wide range of securities.

Trading ETFs

Flexibility and transparency are two features that have added to the popularity of investing in ETFs. An ETF can be bought and sold on the marketplace during the whole trading day and an investor can access the price at any given moment.

When to trade ETFs

As an ETF tracks the performance of underlying asset classes, buying an ETF gives investors a simple and cost-effective tool to be exposed to the underlying securities. Instead of buying stocks in all companies included in an index, investors can be exposed to those stocks with a lower risk. Investors can invest in many industries, companies or markets with the purchase of just one instrument.

Who will benefit the most from trading ETFs?

Exchange Traded Funds suit active investors who have a firm understanding about trading in financial instruments and who want to benefit from changes in the market as easily and quickly as when buying or selling stocks.

How are ETFs traded?

Investing in ETFs is done by placing your order with your broker — similar to the way stocks are bought and sold.

History of ETFs

ETFs have become a very popular investment tool due to its flexible and cost-efficient nature. The first ETF was introduced in the U.S. in 1993, known as “Spider”. In Europe it is one of the fastest growing instruments in recent years and has grown its turnover more than ten times since it was introduced in 2001. In 2008, the annual turnover of trading in ETFs in Europe reached over 400 billion EURO. NASDAQ OMX has been actively involved with ETFs as it launched the European NASDAQ-100 Tracking Stock in 2002 on five different European exchanges. Today there are 1400bn USD in assets under management and almost 3000 ETFs listed on exchanges globally.