ETFs (Exchange Traded Funds) are not just confined to the oil and gas industry. They feature in various industries. In fact, by their very nature, they are a cross section of many commercial sectors and businesses within those categories.
ETFs are one of the latest innovations in the world on investment. They are akin to stocks and shares, but they have their own particular characteristics that make them particularly attractive to investors.
A brief history of ETFs
The first Exchange Traded Fund appeared the USA back in the year 1993. It was designed initially for use by institutional investors in order to carry out specific, sophisticated trading strategies. Over the years they have been embraced by both independent financial advisors and individual investors, for creating investment portfolios.
Whereas a stock or share is issued by a singular company or organisation, modern ETFs are actually “baskets” of funds.
The first attempt to float an ETF was the creation in 1989 of the Index Participation Shares for the S&P 500 in the US. However, a Chicago federal court decided that this new fund was more like a futures contract and could only be traded on the futures exchange.
Canada was the next country to make a foray into ETFs with Toronto 35 Index Participation Units which were linked to the TSE-35 Index.
Another three years passed and in the January of 1993, the S&P Depository Receipt (nicknamed Spider) was launched. It is still around today and is in actual fact one the most traded ETFs. But it wasn’t until 15-years later that the first actively managed ETF reached the open market. There are now approximately 2,000 ETFs trading on the US stock exchange. You can get a complete list of all current ETFs here on the eftnd.com website.
The advantages that ETFs offer to investors
There are many advantages to creating investment portfolios with ETFs. They include:
- Minimal transaction fees
- They can be traded even more freely than stocks and shares
- Their inbuilt diversification tends to iron out cost volatility
The increasing popularity of ETFs
It is small wonder then that more and more investors are now using ETFs, and so are independent financial advisors (IFAs). Many investors or agents actively seek ETFs in the oil and gas industry, but these form a portion only of the diverse funds that go into making a singular ETF. This diversification is very advantageous to the individual investor, essentially because of its propensity to minimise any risk, and it is the reason that many IFAs across the planet are now using ETFs to create investment portfolios.
Another of the advantages that ETFs have over other types of funds is that they keep the minimum amount needed to create an investment portfolio as low as possible. In addition, the cost of any transactions is also minimised.
Some of the top IFAs worldwide using ETFs
ETFs are ideal for various types of investments. Canadian wealth creation specialists Nest Wealth use EFTs to create customised investment portfolios for the clients from as a little as $20 per month. US financial experts Betterment LLC create EFT portfolios with fees as low as 0.25% for their digital plan portfolios and 0.4% for their Premium plan portfolios, while UK based wealth managers Moneyfarm use them not only for their low cost to clients, but also for the transparency that they offer.
ETFs are also often now used to fund pensions and are particularly ideal for robo-investing too on account of the fact the robo-investment management fees are that much lower than fees normally charged for man-managed accounts, where a financial expert controls your portfolio and offers advice as and when necessary.
Investment opportunities for all
ETFs have come an awful long way in a very short time, and they have literally changed the face of finance. With the low fees and low minimum investment amounts they offer they have introduced investment opportunities to the masses.