Exchange Traded Funds (ETFs) explained
15 July 2015 / Published in Your MoneyETFs (or Exchange Traded Funds) are one of the fastest growing investment products in the world but aren’t widely known to New Zealand investors just yet.
They’re designed to provide a simple and affordable way to get an investment in multiple companies, bonds or other investment types - with one simple purchase.
As you can trade ETFs online with ASB Securities, we thought now would be a good time to explain what they are.
What are ETFs?
ETFs are traded on the share market, just like shares, and aim to provide returns that mirror the performance of the group of companies or securities they track - such as the ten largest companies on a stock exchange.
ETFs in New Zealand
ETFs have been around for a while but their popularity hasn’t grown as fast in New Zealand as it has in the rest of the world. This is largely to do with the fact that New Zealanders tend to invest in more familiar things like property and cash.
The results of ASB’s latest Investor Confidence Report confirm a strong property focus among many New Zealanders, with a substantial 38% of respondents saying they consider their own home as their main investment.
ASB Securities Managing Principal, Angela Busby says “New Zealanders are traditionally property-focused, which may mean they don’t consider other options.”
Why you might be interested in ETFs
You’ve probably heard that when it comes to investing, spreading your risk is important. But this often seems difficult and you might not know where to start.
“ETFs can provide a more straight-forward way to diversify investments and may be suitable for a wide range of people; from those who think diversifying their portfolio themselves is too complex, to those who are looking for something a bit easier to manage. It can be cheaper than buying multiple stocks individually or paying a fund manager to manage your funds” says Angela.
Find out more about investing in ETFs here.
