Investing in Exchange Traded Funds - ETFs

Exchange Traded Funds are similar to Mutual Funds or Unit Trusts except the price is quoted continuously through the trading day, like Investment Trusts rather than just once and there is no real manager, because they simply track an index (or other more complex screening algorithm) using computers, therefore have very low annual fee and small bid/offer spread. This makes them very good for short term trading.

The main disadvantage is you will have exposure to the whole index including badly performing companies or assets, whereas with a managed fund, if the manager is good, you may be able to avoid exposure to the badly performing assets (managers however do not have a good reputation for justifying their fees)

ETFs are available from any stock broker in the same way you might buy a share, stock or managed fund. They are also listed in many good financial publications such as the Financial Times.

There are many companies providing ETFS including:

iShares Plc

Lyxor ETF

ETFS Securities

ETFS can be used to gain exposure to:

Stock indices such as the S&P, Dow, FTSE

Bond indices in many countries

Commodity Prices e.g. Gold, Silver

House Prices

In addition to these index trackers there are also inverse index trackers and leveraged short and long trackers. These are more complex and far riskier.

iShares £ Corporate Bond (SLXX)

iShares FTSE 100 (ISF)

iShares FTSE UK Dividend Plus (IUKD) - High yielding shares

iShares £ Index-Linked Gilts (INXG)

iShares FTSE UK All Stocks Gilt (IGLT)

ETFS Silver (SLVR)

Gold Bullion Securities (GBS)