Exchange traded funds
Exchange traded funds (ETFs) are managed funds that can be bought and sold on a stock exchange, just like Australian shares. ETFs are usually made up of a basket of assets, which may include Australian shares, international shares, bonds, currencies and derivatives. They enable you to invest in asset classes you may not be able to access directly, making them a great tool for diversifying your portfolio.
Each ETF is given a stock code and traded on the securities exchanges. They are given a unit price based on the net asset value of the fund. Like shares, ETFs are open-ended and can be bought and sold at any time. Most ETFs are structured to replicate the return of a specific benchmark or index.
Key features
- Cost-effective – they can be more cost-effective than directly buying the equivalent portfolio of assets and typically have lower fees than managed funds.
- Offers diversity – in a single trade you gain exposure to a diversified portfolio of securities or other assets.
- International exposure – they can give you exposure to international markets, as well as fixed income and other sectors.
- Simple – through just one trade, you can potentially invest in global and local markets.
- Control – you can build your own portfolio across sectors, countries and asset classes using different ETFs.
- Flexible – they give you liquidity and flexibility to react to changing market conditions.
- Competitive brokerage through Westpac – start trading from just $19.95 or 0.11% of the value of the trade (whichever is greater)^.
- The first ETF was launched in Australia in 2001 and the industry has experienced rapid growth.
Key risks
- Asset values – ETFs are inextricably linked to the trend of the underlying asset. If the value of the underlying asset falls, the value of the ETF will also fall.
- Trades – certain market conditions (for example, lack of liquidity) could make it hard for you to buy or sell ETFs.
- Asset classes – ETFs that use synthetic investments or derivatives to replicate the performance of an investment could expose you to additional risks and/or losses.
- Foreign currency volatility – Some ETFs with underlying exposure to international assets may have added currency risk
- Geopolitical risks – the political situation in the home country of the market or benchmark could affect the value of the ETF’s assets.
For more information about ETFs, please refer to the Australian Security Exchange’s ETFs and other ETPs webpage.
Visit our platform features webpage to see how easy it is to trade with Westpac Share Trading.
Things you should know
This website is directed to and for the benefit of Australian residents who are located in Australia only. Share trading through this website is a service provided through Westpac Securities Limited ABN 39 087 924 221 AFSL 233723 by Australian Investment Exchange Ltd ABN 71 076 515 930 AFSL 241400 ("the Participant"), a market Participant of the Australian Securities Exchange Limited (ASX) and Cboe Australia, a clearing participant of ASX Clear Pty Limited and a settlement participant of ASX Settlement Pty Limited.
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