An ETF simply tracks these indexes The ETF provider (like Nestle in the ETF world) buys the stocks that are in the index This makes up the fund So, you, as the buyer have bought the S&P, or the FTSE etc…
Buy several stocks in one transaction – you dont need that much money Small charge for putting the fund together Can be easily bought through the stock market
You had just started a new job or had some money that people gave you for your 21 st. You dont have enough to buy a strategy, but you do want to invest… By buying something like the S&P500, you can gain a lot of diversification with one transaction. With a few hundred euro, you can intelligently invest
The mother with the child benefit who does receive a regular income, she doesnt have enough to buy a strategy. By building up that income over a couple of months and then buying an ETF and repeating that process over the youth of her child, she will have built up a significant, diversified and low cost portfolio.
A man asks you where to invest his pension. He has a significant amount of money, but doesnt want to have to manage a strategy or simply doesnt want to pick direct stocks… By buying ETFs in several markets across the world, he will have built up a significant, diversified and low cost portfolio that doesnt require management or direct stock picking
The lady who wants to invest in the Chinese market, but doesnt know enough about individual companies to invest in them. By buying an ETF in the Chinese market, she is getting diversified exposure i.e. taking a position in several stocks. However, she doesnt have to bear huge transaction costs.
An investor wants to invest in the Irish market as he feels its undervalued. However, he hasnt enough to buy a number of companies, but does have enough to buy one or two. By buying the Irish ETF, he can gain low cost, diversified exposure to the market that he wants with small funds.
What does the ETF track? What sort of diversification is involved? What is the expense ratio? What is the dividend yield?