Three exchange traded funds you should avoid

Exchange traded funds (ETFs) are typically easy to understand, transparent and cheap. But there are some funds out there that traditional ETF investors should steer well clear of, says Tim Bennett. Here, he picks out three types of fund that should come with a health warning.

As a rule, we like exchange-traded funds (ETFs). They're transparent and easy to understand a typical ETF simply tracks the price of an underlying security, be that an index, sector, commodity, or currency. As a result, they are also cheap annual management fees are usually well below 1% and in many cases under 0.5%.

But as the industry has mushroomed global investment topped $1trn at the end of last year more esoteric products have been launched as fund groups try to take advantage of investors' interest in the sector. Some of them might have a place in the toolbox of a professional day trader, but for most traditional ETF investors, they should come with a health warning.

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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.