What is an ETF?

Exchange Traded Funds (”ETFs”) are investment funds which hold a pool of securities such as shares, bonds, and commodities. ETFs trade similarly to when you purchase or sell ordinary shares with the same brokerage rates applying and are traded on the Australian Securities Exchange (“ASX”) and Cboe Australia available through our Westpac Share Trading website.

ETFs provide investors an opportunity to trade in a cost-efficient manner while improving diversification and exposure through investing in a range of asset classes such as shares, property, and fixed interest.

ETFs can be structured to track specific investment goals for a particular index, sector, strategy, theme, or commodities allowing for greater trading flexibility.

Exchange Traded Funds Illustration

Benefits

  • Cost effective – more cost effective than buying the equivalent portfolio of shares and typically have lower fees than managed funds.
  • Diversification – a single trade provides instant exposure to a diversified portfolio of securities.
  • Access – gain exposure to international markets, as well as fixed income and other sectors.
  • Simplicity – invest in global and local markets all through a single trade.
  • Control – build your own portfolio across sector, country and / or asset class.
  • Flexibility – the listed nature of an ETF provides investors with the liquidity and flexibility to react to changing market conditions.

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.

Learn More: Use our ETF Screener

The ETF Screener is a complimentary trading tool available on the website. The trading tool has a filter results section which allows you to choose specific criteria and components based on how you would like your ‘basket of securities’ to be.

Select Quotes & Research > Tools > ETF Screener to get started.

For example, if you are looking for Australian shares that are in the health care sector and an ETF that tracks the health care sector index, you can tick ‘Equity’ under Asset Class, then tick ‘Australia’ under region, then finally tick the ‘Health Care’ sector under the Morningstar Sector.

ETF Filtering

Select ‘Apply Filters’ for the results to appear below. For this particular example, as you can see there are 27 ETFs available. To perform in-depth research on specific ETFs, simply click on their unique codes listed under the results which will redirect you to a comprehensive research page.

ETF Filter Results

All Exchange Traded Fund products available on the website can be identified through the ‘ETF’ label on searches made.

It is also important to read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) from the ETF issuer before deciding whether to invest.

Find more information about Exchange Traded Funds (ETFs).

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This information is intended to provide information for educational purposes only and is subject to change at anytime without notice.