Capitalising on short-term opportunities

Exchange traded funds

ETFs have the ability to take advantage of short-term openings by increasing or reducing exposure to a particular market or region without the costs, relationship problems or time delays incurred if this was achieved by means of the underlying funds in a portfolio

ETFs are essentially index-tracking funds that trade on an exchange like an ordinary share. Their job is to replicate the performance of a specified index by holding a basket of shares in the underlying companies that make up the index, in the correct weightings. Creation and redemption of shares provides liquidity and ensures that the ETF reflects the prices of the stocks it holds rather than the vagaries of supply and demand in the secondary market. ETFs can be bought and sold throughout the day as prices are updated constantly. Size of investment is not a problem for liquidity; inve...