Exchange-traded funds (ETFs) are passively managed investment funds that track the performance of a basket of pre-determined assets. It can be the SA Top 40, S&P 500, Nasdaq 100 Resources, Gold etc.
They are traded the same way as shares and the main difference is that whereas one share gives exposure to one company, an ETF gives exposure to numerous companies in a single transaction.
ETFs can be traded through your broker in the same way as shares, or purchased in smaller fractions via a monthly or lump sum investment on many of the platforms Innov8ions are contracted to. In addition, many ETF also qualify for the tax-free savings account, where both capital and income gains accumulate tax free.
Benefits of ETFs
- Gain instant exposure to various underlying shares or bonds in one transaction
- They diversify risk because a single ETF holds various shares
- They are cost-effective
- They are liquid – it is usually easy to find a buyer or seller and they trade just like shares
- High transparency through daily published index constituents