Are ETFs different investment tools?

Team Veye | 26-May-2023 investment tools

As the stock market surges to new record highs, an increasingly popular way to invest continues to achieve new milestones of their own. 

According to a report, many retail investors in the products are not comfortable with their knowledge level of ETFs. Some ETF providers have noted the need for even more ETF education and have ramped up their own efforts to help investors makedecisions.

While getting acquainted with exchange-traded funds (ETFs), you will probably wonder as to what makes them different and sometimes better than other investment tools out there. ETFs are similar to mutual funds, in that they’re generally baskets of stocks. But that’s where the similarities end.

Exchange-traded funds (ETFs) are investment funds traded on the stock exchange. Most of the ETFs have been created in order to replicate the performance of market indices. 

The value of assets managed by global exchange-traded funds has already crossed $5 trillion. Even the Australian ETF market has reached a new milestone, hitting $50 billion in assets under management after a surge of $10 billion in the first half of this year amid predictions that it could hit $100 billion by 2022.

There are a few advantages to ETFs, which are the cornerstone of the successful strategy known as passive investing. The advantages of ETFs over mutual funds are, among other things, lower costs, the possibility of tracking the performance of the whole market rather than investing in single stocks, and potentially better investment results.

Exchange-traded funds (ETFs) pay out the full dividend that comes with the stocks held within the funds. To do this, most ETFs pay out dividends quarterly by holding all of the dividends paid by underlying stocks during the quarter and pays them to shareholders on a pro-rata basis

There is a wide range of ETFs Australian investors are using for income. There are also fixed-income ETFs that invest in government, semi-government and corporate bonds.

They are proving popular with retail investors, especially those with self-managed super funds because they can add instant diversification at low cost to portfolios.


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