A Beginner's Guide to ETFs

Let's go back to basics and start at the beginning of ETF--or ETP--investing

Holly Cook 2 November, 2011 | 6:07PM

The emergence of exchange-traded funds (ETFs) has gone from strength to strength since their introduction in the U.K. a few years ago, and Morningstar's ETF analysts have been there every step of the way to provide education, direction and independent research. But many investors are still wary of these securities, not least because of the bad press they've received of late in regard to transparency and even the advent of the odd 'rogue trader'.

So let's take it back to basics: What is an ETF?

At the most basic level, ETFs are just what their name implies: baskets of securities that are traded, like individual stocks, on an exchange such as the London Stock Exchange. Unlike OEICs and unit trusts, ETFs can be bought and sold throughout the trading day. They can also be sold short and bought on margin, or using stop-loss orders--in brief, anything you might do with a stock, you can do with an ETF.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Holly Cook

Holly Cook  is Manager, Morningstar EMEA Websites

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