Investing 101: What is an ETF?

September 16, 2021
Team Upstreet

An exchange traded fund (ETF) is a listed fund that provides exposure to a basket of securities, shares or other assets. 

How is an ETF created and traded?

  1. A fund manager will bundle together a set of various assets and launch the ETF.

  1. The ETF will be quoted on an exchange and given a unique identifier known as the ticker symbol.

  1. Using the ticker and their stockbroker, investors will find the ETF on the exchange to buy and sell.

ETFs provide investors with relatively low-cost access to a variety of asset classes, industries and markets. They are often considered lower-risk investments as they involve a basket of securities, therefore increasing diversification. Some ETFs have more risk than others.

Types of ETFs available for trade:

Equity ETFs: contain stocks and may be focused on a particular country (e.g., Australia) or an exchange.

Bond ETFs: contain fixed income securities such as corporate bonds and treasury bills.

Commodity ETFs: contain commodities like gold, crude oil, silver and sugar.

Industry ETFs: contain stocks with a focus on particular sectors or industries like healthcare or financial services. 

Currency ETFs: contain a single or a basket of currencies in the foreign exchange market. 

Sustainable ETFs: contain social, environmental and governance related stocks.

Before you start investing, complete your due diligence, do your market research and choose the ETF(s) that best suits your reward and risk profile. 

The information in this website is prepared by ESC Operations Pty Ltd (ACN 635 424 538, AR 1283 677), who is an authorised representative of Cache Investment Management Pty Ltd (ACN 624 306 430 AFSL 514 360) (Cache). Any financial products described in this post will be issued by Melbourne Securities Corporation Limited (ACN160 326 545, AFSL 428 289), as disclosed in the relevant product disclosure statement. All information is general information only and does not take into account your personal circumstances, financial situation or needs. Before making a financial decision, you should read the relevant Product Disclosure Statement and Target Market Determination and consider whether the product is right for you and whether you should obtain advice from a professional financial adviser.