What is an EFT?
An ETF (Exchange Traded Fund) is funds that are traded on an exchange. Generally, ETFs aim to track the performance of a specific index, sector, commodity or other underlying assets.
ETFs can be purchased and sold on a stock exchange the same way a regular stock can. When you invest in an ETF, you get a large and diverse collection of assets that you can buy and sell during market hours. This potentially lowers your overall risk and exposure, whilst assisting in the diversification of your portfolio.
An ETF can own hundreds or thousands of stocks and shares across various industries, or it can be isolated to one particular industry or sector. Some funds focus directly on the Australian offerings, whilst others have an international outlook. As an example, banking-focused ETFs contain stocks of various banks across the industry.
What can you invest in through ETFs?
There are hundreds of different ETFs available on the ASX, with a wide variety of choice to create a diversified portfolio to suit any individual’s needs. ETFs are available for a range of asset classes and individual assets, which include:
Australian shares and sectors: From Australian large caps to financials, there is a variety of ETFs that provide exposure to the broad Australian market, specific sectors and objectives such as generating a high level of income.
International shares and sectors: Investors are increasingly recognising the advantages of diversification and growth potential that international shares have. There are funds that provide exposure to the S&P 500, as well as shares in the under-represented Australian markets of global healthcare, technology and cybersecurity.
Fixed income investments: For the convenience of investors, these ETFs bundle bonds from a single sector or a variety of sectors, such as corporate bonds and government debt.
Digital assets: The performance of Bitcoin and Ethereum has driven the crypto economy’s rapid growth. You may now invest in the businesses establishing the cryptocurrency industry thanks to new digital asset exchange-traded funds (ETFs), such the BetaShares Crypto Innovators ETF.
Multi-asset ETFs: These ETFs allow investors to instantly obtain exposure to a number of asset classes at a level of risk that matches their risk tolerance. Due to the fact that the asset allocation is handled by the ETF provider, these products might save investors time.
Property securities: ETFs that invest in both Australian and international real estate investment trusts are available to investors looking for income and property diversification options.
Foreign currencies: Foreign currency ETFs can assist investors in avoiding the difficulty and complexity of dealing in foreign exchange markets.
Precious metals and commodities: For investors looking to diversify their exposure to gold, oil or resource equities, precious metals and commodities ETFs provide a way to achieve the focused exposure.