ETFs are low-cost convenient ways to get exposure to a region or a type of investment through one single trade.
ETFs are low-cost convenient ways to get exposure to a region or a type of It's like buying a mixed case of wine which is put together for you and saves you picking all the individual bottles. You just buy the case and let someone else worry about what goes into it!
Here's an example. Imagine you buy an ETF. A FTSE 100 ETF. With just one trade you get an investment which has the biggest 100 firms in the UK already in it. Proportionate to their size.
Today HSBC is about 7% of the FTSE 100. So stick £100 in a FTSE 100 ETF and £7 of this will be allocated to HSBC shares for you.
Unfortunately there is often some hieroglyphics to wade through. One of the most popular indices for global markets for example is called the MSCI (a historical coming together of Morgan Stanley with a group called Capital International.) So, for example, the ACWI (All Country World Index) from MSCI is a basket of about 2,500 shares from about 47 countries which lil' ole you could buy with one click. Bear with the jargon and wade through it. Financial people love an acronym or 12!
Boring Money boss Holly Mackay uses ETFs in her investment portfolios as a foundation. A low-cost way to get exposure to major global markets. She then spices this up with some active funds in more specialist areas.
Professionals call this a 'core and satellite' approach. Because investment people like inventing strange names for stuff!