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Exchange Traded Funds

03/07/2022 08:33p.m.
NZ/AU Markets   
Exchange Traded Funds   
NZ Fixed interest   
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An introduction to Exchange Traded Funds

An Exchange Traded Fund (ETF) is similar to a managed fund, except that it takes the form of shares that can be traded openly on a share market - whereas a managed fund can usually only be purchased and redeemed directly through the services of a fund manager.

Many common ETFs have been established to track well-known market indices and therefore do not rely on a fund manager's expertise in actively selecting shares.

Creation of an ETF

To create an ETF, the ETF Manager will buy parcels of shares from many different companies within a group, making a pool.

This pool of new shares is then collectively listed on the share market under its own ticker code.

Features of an ETF

  • An ETF is likely to mirror the movements of the market or index that it tracks
  • The ETF fund selection process is mechanical, as opposed to a manual selection process
  • You can enter/exit the market, at your own discretion, via your share broker
  • There are typically lower annual fees than a managed fund, due to a "passive" fund management style
  • It provides an opportunity to invest in multiple companies

Find an ETF

ETFs are available through Direct Broking for an increasing range of equity and other asset classes.

  • New Zealand Smartshares (www.smartshares.co.nz)
  • Shares in small, medium and large companies ("Small Cap", "Mid Cap", "Large Cap")
  • Shares in companies from specific countries, such as Japan, Singapore and Korea
  • Shares in companies from regions such as Europe and Asia
  • Shares in companies from economic groupings, such as the emerging economies
  • Shares in companies from industrial sectors such as Healthcare, Telecommunications, and Materials
  • Shares in Property Trusts
  • US Corporate and US Treasury Bonds
  • Precious Metals (these are termed "exchange traded commodities")

Investment products involve risks, including the potential loss of some or all of the principal amount invested. The information displayed on this page does not constitute a recommendation, opinion or guidance on the part of Direct Broking on the suitability of any investment products to your investment objectives. Any investment decision made by you will be based solely on your own evaluation of your financial circumstances and investment objectives. If you are uncertain about any aspect of an investment or the implications for you, Direct Broking recommends that you seek expert advice from a financial adviser.