ETF’s or Exchange Traded Funds are in its most simple form, index funds that are both listed and traded on exchanges in the same way as stocks. An ETF is a mixture of bonds, commodities, and stocks that reflect the composition of an index, an example of an ETF would be EWJ, BBJP, S&P. The daily value of an ETF is determined from the net asset value of all underlying stocks and commodities that the ETF represents.
ETF’s have, in more recent times gained a lot of positive feedback from investors, and been widely accepted as a great addition to a portfolio, especially from the more risk adverse crowd of traders, as they are a suitable investment vehicle for those traders who find it a struggle to identify singular stocks for their portfolio. Most Exchange Traded Funds provide investors with returns that closely reciprocate the total returns of securities covered by the chosen index. An investment into ETF’s is a great way to grant your portfolio exposure to a new branch of investment instruments and can be a great way to diversify your portfolio.
Some of the major benefits to trading ETF investments are that ETF investments broaden your portfolio and diversify your holdings, while keeping liquidity to a maximum. In the same way a stock can be traded, an ETF acts in the exact same way, meaning you are free to buy and sell at any time.