ETFs are great investments for the long term too

Exchange-traded funds (ETFs) are growing in popularity with investors. Cris Sholto Heaton explains the differences between ETFs, and why you might choose to use them.

Exchange-traded funds (ETFs) have become highly popular in recent years: at the end of May, ETFs around the world held almost $3trn in assets, up from around $400bn a decade ago. But for many investors, the difference between ETFs, open-end funds (often referred to as unit trusts) and investment trusts is not clear. So what makes ETFs different and why might you choose to use them?

An ETF is a type of fund that is traded on a stock exchange, and can be bought and sold through a stockbroker, just like a share. The price of an ETF varies throughout the trading day in line with the value of the market it tracks so if the FTSE 100 drops 3%, the price of the ETF should drop by the same amount.

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Cris Sholto Heaton

Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.