What are ETFs - and why should you consider them?

Exchange-traded funds, or ETFs, are one of the fastest growing investment products in the world.

As of April this year, the Australian ETF industry had surpassed $100 billion in funds under management - but many experts believe the boom is yet to come.

So what are ETFs? And why should you consider investing in them?

In this video, Bell Direct’s Senior Market Analyst Jessica Amir explains what ETFs are, as well as why you should consider adding them to your portfolio.

ETFs are a basket of securities in a specific theme, like tech or healthcare. These investments can even mimic entire markets, like China or the UK.

They can be bought and sold in a single trade on the Australian Securities Exchange (ASX) too - just like a regular share.

“More and more Australians are using ETFs because they’re the simplest and cheapest way to build international share portfolios,” Amir explains.

ETFs can also be used to gain access to certain parts of the market you want to invest in:

“Let’s say that you want to invest in global banks because you think bank earnings will grow...instead of researching and investing in all the global banks, you can simply buy one ETF, which buys a basket of global bank stocks for you.”

Amir pointed to research, which found a diversified portfolio with Australian and international shares, property, bonds, and gold outperformed an Australian share portfolio - and had half the volatility over the last 10 years.

“Whatever you’re looking for, there’s an ETF for you.”

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