Main Features of ETFs
ETFs are publicly listed investment funds that trade on a stock exchange in the same manner as ordinary stocks. ETFs combine the benefits of traditional stock trading, such as intraday pricing and accessibility, with the advantages of fund investments, such as ready-made diversification.
Even though a great variety of ETFs exist, a number of common features can be found in ETFs. Besides being traded on an exchange, ETFs are typically passively managed, meaning there is no dedicated asset manager appointed trying to beat the market. Instead the ETFs typically have an objective of replicating the performance of a specific index or benchmark, like specific stock, bond, commodity and currency indices or baskets.
Versatile, low-cost trading with ETFs
Some ETFs, called Inverse ETFs or Short ETFs, replicate the inverse performance of the index or benchmark, offering investors the chance to benefit from falling prices. Meanwhile, Leveraged ETFs offer a fixed amount of leverage on the performance of an index, usually around 2:1 or 3:1.
The passive management of ETFs also typically results in a low-cost structure relative to traditional funds. This benefit, combined with the availability of leveraged or inverse tracking of specific indices or benchmarks, makes ETFs ideal for intelligently creating diversified portfolios. The trader can express individual views and preferences and gain efficient exposure to specific sectors, regions or indices.
Another general feature is that the ETF shares trade very close to the net asset value of the underlying fund assets. This is ensured because so-called ‘authorised participants’ – typically large institutions – can exchange ETF shares directly with the fund, with the actual underlying asset used as in-kind payment. Hence, authorised participants will take advantage of any arbitrage possibilities if the price of the ETF share is notably higher or lower than the underlying net asset value. The effect of this is ensuring the ETF share price stays close to the net asset value.
Saxo Bank offers access to a wide range of Exchange Traded Funds from various Tier one providers such as iShares, Powershares, Rydex, StreetTRACKS, SGAM ETFs, Lyxor ETFs and many more.
Saxo Bank’s online ETF range
Saxo Bank offers almost 800 passively-managed ETFs covering a wide range of sectors and markets. Clients can invest in ETFs directly from Saxo Bank’s platforms, while all funds tradable can be bought or sold using the Stock Trading module or the Price List.
Clients can then track the performance of an ETF through the Saxo Bank platforms. It is possible to monitor the price of the ETF through the Price List and to use the charting system to identify longer-term price trends and review past performance. Saxo Bank’s Instrument Information module allows clients to access news and background information related to the ETFs they are trading.
The full list of Saxo Bank’s ETFs.
ETFs Rates and conditions.