ETFs or exchange-traded funds are funds that trade on a stock market. Most ETFs track the performance of a market index or a basket of stocks, so they are an easy way to spread your money across different companies in one go. Because ETFs are listed on stock markets, you can buy and sell them throughout the day.
ETFs are bought and sold on a stock exchange.
You can buy and sell ETFs throughout the day.
ETFs invest in a collection of stocks, bonds or other assets.
Please remember any tax treatment depends on your individual circumstances and may be subject to change in future.
Access all Vanguard, iShares and Invesco ETFs, free of charge with our commission-free share dealing account.
Invest in ETFs as part of an ISA tax-wrapper, and your investments will be exempt from UK capital gains or income tax.
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ETFs and index funds are not the same. They are similar because both ETFs and index funds tend to be passive and track the performance of a stock market or sector. But the way they are built makes them quite different.
You can think of an ETF as more like a share. ETFs trade on the stock market so you can buy and sell them at any point. Index funds are not exchange-traded, so you can only buy and sell your holdings at certain points each day.
For more information on what makes an ETFs different. Take a look at our ETF guide.
ETFs can be a good option for both beginners and experienced investors. They are a great way to invest in a group of companies or other assets like bonds in one go and without having to choose the companies yourself. As with any investment, a decision to invest or not should take into account your personal circumstances and goals.
When you invest in ETFs, like with any investment, you have to be prepared that the value of your investment can go down as well as up. ETFs are not necessarily safer than any other investment, often they track an index so if that falls, so will the value of your investments. What ETFs do provide is the ability for you to spread your money across many companies in one go. This way you’re not relying on one company for growth and this can reduce the risk that your investments fall in value.
At the moment you can’t buy fractional ETFs via the Freetrade app. However, fractional ETFs are on our product roadmap and will be available in the future.