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ETFs help investors gain exposure to a range of investment strategies that can be executed as simply as buying any share.
ETFs are open-ended funds, meaning the number of units on issue can be increased or decreased in response to daily demand. Units can be bought and sold at any time throughout the trading hours. Multiple market makers enhance this daily liquidity and provide robust bid-offer spreads. ETFs have similar liquidity characteristics to the underlying shares that comprise the relevant index.
Most ETFs aim to closely track the performance of a specified index. They have a transparent fund and cost structure. Information on constituents and assets held by the ETF is published on the relevant ETF website, giving investors an up-to-date view of the index and assets underlying the ETF.
Because most ETFs aim simply to track the performance of an index, there are no in-built "active management" fees for non-active ETFs and generally ETFs therefore have significantly lower fees than actively managed mutual funds.
ETFs are generally designed to track indices, most of which are comprised of dozens or hundreds of or even more securities. So instead of 'putting all your eggs in one basket', ETFs allow you to invest in entire countries or sectors to reduce your exposure to any single stock.
Some ETFs invest in a pool of overseas securities, offering investors exposure to a foreign market.
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