Investing in ETFs

Pros

• You simply track the index, without having to buy and sell a lot of investments (and pay the associated fees).
• You can keep track of the prices of most ETFs from minute to minute and buy and sell most ETFs on an ongoing basis.
• ETFs offer instant investment diversification.
• There are ETFs for different investment assets, including shares and bonds.
• You can invest in sectors or based on specific themes that are otherwise inaccessible to private investors.

Cons

• ETFs are also exposed to a price risk. If the index that the ETF is tracking goes down, the price of your ETF will also go down. Like with regular investments in shares and bonds, you could lose all or part of your investment.
• A passive ETF never outperforms an underlying index or basket. With an active investment fund, your investment may do better than the index.
• No ETF is the same. Some ETFs invest in higher-risk sectors, for example.
• Some ETFs invest only in a single sector or geographical region, thus increasing the risk exposure.

Companies issue shares to raise funds for new activities and investments. When you buy a share in a company, you become a co-owner of the company.

An ETF (exchange-traded fund) is comparable to an investment fund. It diversifies investments, just like an investment fund does. But a typical feature of an ETF is that it generally tracks an index, such as AEX or Dow Jones, or it tracks the price of a certain ‘basket’ of investments in a certain sector or geographical region. ETFs are also referred to as ‘trackers’.