WHAT ARE ETFs AND WHAT ARE THE ADVANTAGES?
EXCHANGE TRADED FUNDS
- ETF (Exchange Traded Fund) is a financial asset traded on the stock exchange. It consists of several financial assets from the same assets class and seeks to replicate the performance of a given index, either fixed income or variable income.
- ETFs are used on a large scale in the passive investment strategy because they are diversified and have lower management fees.
- In New Zealand, ETFs are not capital gain taxed and some of them do not pay dividends since they are reinvested in their own units.
- Examples of ETFs in NZX (New Zealand Exchange): Smartshares NZ Top 50 ETF (FNZ), Smartshares S&P/NZX ETF (NZG), Smartshares S&P/ASX 200 ETF (AUS), Smartshares US Equities ESG ETF (USA), etc.
Advantages of ETFs for investors:
- Greater simplicity.
- Lower administration fees.
- Lower risk.
- Profitability in line with the market.
- Low need for follow-up (or portfolio rotation)
See below the ETFs traded on NZX-New Zealand Exchange.