Exchange-traded funds

ETFs are traded on a stock exchange, just like shares. That means you can buy and sell them in the very same way - using an investment platform, like ii, and within trading hours.

You'll need to open an investment account first. Then, research and choose the ETFs you want to buy. Always remember to check the costs of investing, including trading fees and platform charges.

Though they’re called exchange-traded funds, ETFs work more like shares. You can trade them on an exchange which means you can buy and sell them throughout the day.

But ETFs do have similarities to traditional funds. ETFs invest in a range of underlying assets and will have a management charge attached to them too. The management charge of ETFs is usually lower than other types of funds, due to the fact that no one actively manages them. Instead, ETFs simply track the performance of their underlying basket of assets.

As ETFs track a collection of investments, you may not need to invest in many to achieve a well-balanced investment portfolio.

But it’s important to pay attention to your ETF's underlying investments, to ensure your overall portfolio includes a diverse range of sectors, themes and regions. This can help you manage your risk of loss.

The ETFs you choose to invest in should reflect your appetite for risk and form part of a well-balanced investment portfolio.

With ii, you have thousands of ETFs to choose from. If you’re not sure where to start, lean on our experts for some investing inspiration and ideas.

You can also see what other investors have been buying and the current best-performing ETFs on our top ETFs page.

Beginner investors may want to use ETFs to gain exposure to major stock market indices, such as the S&P 500 or FTSE All Share. Broad exposure to the major stock markets can play a core part in many beginner investor portfolios. And ETFs provide a relatively cheap and easy way to achieve this.

Some ETFs that hold stocks will pay dividends and distribute these to investors. In fact, a special type of ETF, known as high-dividend ETFs, focuses specifically on stocks that pay high dividend yields.

ETFs that pay dividends will usually pay investors on a quarterly basis. Investors can receive their share of the dividends as cash or additional units of the ETF.

Many investors choose to reinvest their dividends to compound the growth they see in their ETF investment. 

ETFs come in all shapes and sizes. The most traditional are those that track established stock market indices, such as the FTSE 100 or NASDAQ. There are also those that track bond market indices and others that reflect the performance of baskets of commodities, property or currencies.

Many popular ETFs now track certain business sectors within a wider index - for example, those which track the finance businesses of the S&P 500.

Thematic ETFs are also widely available. For example, a popular theme in recent years has been computing. A computing ETF will usually track a computing index, comprised of - you guessed it - computing companies.
 
Another ETF option is known as ‘smart beta’ in industry jargon. These ETFs do not track shares by market capitalisation, as a fund tracking, say, the FTSE 100 index would. Instead, they decide which shares to track by targeting those that match certain goals. For example, some smart beta ETFs follow a basket of companies that are reliable dividend payers, while others target the highest-yielding shares on a particular index.

When you buy and sell ETFs with ii, you’ll pay our standard trading charges on top of your monthly fee. You can view our charges to find out more.

You can save on your trading charges if you use our free regular investing service when buying ETFs.

Even though ETFs trade on the stock market, you won’t pay any stamp duty when buying them. This is an important difference between ETFs and shares.