ETF is the acronym for “Exchange Traded Fund”, which is an investment fund made up of stocks or bonds from several companies. They are also known as “trackers”. The management of an ETF is passive: it replicates a stock market index by faithfully following its evolution.
With ETFs, the individual investor can very easily implement investment strategies that will allow him/her to capitalise on dividends, volatility, leverage or even falling markets.
Diversifying values and risks
Investors can access, through a single ETF, a specific market made up of hundreds or even thousands of securities.
An ETF can thus be used to easily diversify a portfolio while spreading risk. The choice is very wide: there are ETFs for all asset classes (equities, bonds, etc.), in geographic areas or in a large number of business sectors or themes, all over the world.
The objective of an ETF is to reproduce the evolution of a stock market index as closely as possible to its performance, that is to say with the minimum possible performance gap. Like the index it replicates, the ETF can go up or down, therefore investing in them involves risks that should be considered before making any decision.For example: The MSCI World Index is made up of 1,637 stocks representative of large and medium-sized companies in 23 developed countries.
- Investing € 1,000 in the MSCI World ETF is like investing € 1,000 spread over the 1,637 stocks that make up the MSCI World index, only by placing a single stock market order.
- If the MSCI World Index increases/decreases by 2%, the performance of the MSCI World ETF will also increase/decrease by 2% .
Like funds, ETFs allow you to invest in multiple securities through a single security, thus offering instant access to all types of markets and asset classes, all over the world. They are traded continuously, and investors can easily buy and sell them during trading hours, as well as know their price at any time.
Buy and sell CFDs on ETFs
Leveraged trading of ETFs is a way to enhance the size of a trade with the use of margin, leading to an increase of the potential profit or loss.
By opening a CFD position, the trader agrees to trade the price difference of an ETF from one period to another. ETF CFDs are available to cover all major markets across the globe.
Click here for the full list of ETF CFDs on OneRoyal.
Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.
