The different types of ETFs you can invest in

Julie Brownlee, Fsp Invest, 10 Nov. 2015

Tags: etfs, exchange traded funds, investing in etfs, types of etf, investing



Exchange traded funds (ETFs) are funds that trade on the stock market, just like shares.

They fall into the exchange traded product (ETP) sector.

So what types of ETFs are available to invest in?

Let’s take a closer look…



The attraction of ETFs


ETFs are becoming increasingly popular the world over as a way to invest on the stock market.

This is mainly due to the wide array of assets and markets you can gain exposure to through investing in them.


ETFs on indices


The simplest ETFs are ones that track specific stock market indices.

For example, you invest in an ETF that tracks the JSE Top 40 Index. If the Top 40 Index rises by 2%, the value of your ETF rises 2%. If the Top 40 Index falls by 2%, the value of your ETF drops 2%.

As well as the largest companies on the JSE, you can invest in other sectors including property, financials and resources.


ETFs on offshore markets


As well as being able to use ETFs to invest on different JSE indices, you can also trade international markets.

The main benefit here is it avoids the need to take your money offshore. You can invest in ETFs tracking the performance of different international indices, such as the top stocks in the UK, Europe and the US.


ETFs on commodities


There are also ETFs that track commodities like gold and platinum. These funds offer an easy way to invest in precious metals and other commodities.

These ETFs also avoid the need to deal with the commodities market directly.


ETFs on bonds


If you’re looking for a lower risk investment, you could also consider investing in ETFs that track the South African government’s bonds.

This is a consideration if you’re looking to reduce your overall risk.

So there you have it. The different types of ETFs you can invest in.

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