Exchange-traded fund (ETF)

An exchange-traded fund (ETF) is an equity-based product combining the characteristics of an individual share with those of a collective fund. Like unit or investment trusts, ETFs track a group of shares or an asset (eg gold), giving diversified exposure to a market or sector.

Unlike with most funds, the shares held are defined in advance so that when you buy, you know what will be in the fund. This makes ETFs similar to standard index funds, but they’re more flexible: they can be traded through a stockbroker at any time in lots of any size. And costs are low: management fees tend to be around 0.5%, as opposed to the 1% charged by most trackers.

ETFs can also be held in an Individual Savings Account or a Self Invested Personal Pension.

• Watch Tim Bennett’s video tutorial: What is an exchange-traded fund?

MoneyWeek magazine

Latest issue:

Magazine cover
Heading higher?

Or are house prices set to fall?

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

'Would you rather upset God, or have Him just ignore you?'

In the first of three interviews with Merryn Somerset Webb, Hugh Hendry, manager of the Eclectica Fund, talks about what it takes to be a good hedge fund manager – and how he learned to stop worrying and love central banks.


Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.


21 November 1969: The first permanent Arpanet link

A milestone in the formation of the internet, the first permanent Arpanet link was established on this day in 1969 between researchers in the United States.