Forefront of ETFs
ETFs

ETF Investing

Explore how ETFs can be cost-effective tools that help you invest in new possibilities.

Explore our ETF capabilities

Our ETF capabilities cover major equity, fixed income and commodity benchmarks and those providing access to innovative strategies and more specialist market segments, some not available from any other ETF issuer.

The forefront of Fixed Income

The forefront of Fixed Income

ETFs can offer convenient access to broad and diversified baskets of bonds at a low cost.

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Investing in ESG with ETFs

Investing in ESG with ETFs

ETFs have become key components in ESG portfolios. 

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Gold investing

Investing in Gold

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Why Invesco for ETFs

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Explore ETF insights

  • Investment Outlook
    Equities%20investment%20outlook%202024
    Investment Outlook

    Equities investment outlook: our equity market predictions for 2024

    By Invesco

    It’ll be a challenging backdrop for equities in 2024. From an investment perspective, company fundamentals are likely to become more important. Read our investment outlook for more.

    December 4, 2023

ETF investing FAQs

An Exchange Traded Fund (ETF) is a pooled investment vehicle with shares that can be bought and sold throughout the day on the stock exchange, in the same way that ordinary stocks and shares are traded.

Exchange Traded Commodities (ETCs) are listed debt instruments traded on a stock exchange and backed by a commodity. They are not funds or ETFs.

Similarities

  • Both offer diversified exposure to main asset classes
  • Both are open-ended
  • Yes, typically UCITS funds

 

Differences

  • ETFs can be bought via a stockbroker or trading platform, whereas mutual funds are bought via a fund management company. 
  • ETFs can be bought at any time during the day, when the exchange is open, whereas mutual funds are once per day.
  • ETFs are priced throughout the day, compared to mutual funds which are priced once per day. 
  • ETFs are highly transparent, whereas it varies with mutual funds. 

Benefits:

Low cost of ownership – ETFs tend to be cheaper than most other funds.  

Liquidity – Creation/redemption process ensures liquidity

Ease of trading – ETFs can be traded on a stock exchange at any time, when open. May be an attractive feature for investors who are looking for more flexibility around when to buy and sell an investment.

Transparency – ETFs are very transparent and usually disclose their full list of holdings daily on the ETF provider’s website.

Index tracking – Physical and synthetic replication models may offer economic advantages

Risks:

Tracking differences: ETFs may not track an index perfectly. The difference between fund return and index return is called ‘tracking difference’.

Capital risk: Like any investment product, the value of an ETF may go down as well as up, and you may not get back the amount invested.

There are many ways for fund managers to track the performance of an index. These ‘replication methods’ fall into two broad categories, physical and synthetic.

Physical ETFs own the underlying stocks or bonds that comprise the benchmark index; whereas a synthetic ETF aims to deliver the index performance through a swap provided by an investment bank. A swap is a type of derivative contract where two parties agree to exchange (“swap”) one stream of flows for another.  

At Invesco, we pioneered a synthetic method called “physical with swap overlay” whereby the ETF holds a basket of quality securities, which are not the same as those in the index but are expected to produce most of the returns. To reduce tracking error, the ETF has swaps often with multiple counterparties (investment banks) that pay the difference between the index return and the return of the basket of securities.

Smart beta is a term for any rules-based strategy that uses characteristics other than just geography and market capitalisation to select and weight the securities of the index.

Footnotes

  • 1 30 November 2023

Investment risks

  • For complete information on risks, refer to the legal documents.

    The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

Important information

  • Views and opinions are based on current market conditions and are subject to change.Data as at 31 October 2023, unless otherwise stated.

    This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.