CAPTRADER - YOUR BROKER FOR GLOBAL TRADE

ETFs are particularly suitable for investors who want to invest passively and for the long term, with the aim of achieving market returns. Depending on personal risk tolerance, an ETF portfolio can be structured more offensively or more defensively. For example, in addition to a pure equity portfolio, investors can also invest in a portfolio of equities, bonds, gold or other securities.

ETP is the abbreviation for Exchange Traded Products. ETFs, ETCs and ETNs are grouped under this term. An ETF is an exchange-traded fund and usually tracks a stock index. As a special asset, the capital invested in it is also protected against the insolvency of the ETF provider. ETC is the abbreviation for Exchange Traded Commodities and refers to commodities traded on the stock exchange. With ETC you have the opportunity to invest in commodities and precious metals. However, in most cases, these are not physically purchased. Futures contracts are used to replicate the price of the underlying commodity. Due to ongoing rolling losses, some ETCs are rather unsuitable for long-term investment. Exchange Traded Notes (ETNs) are debt securities that track an index. ETNs allow you to invest in a wide variety of asset classes such as commodities, currencies or equities. In addition, ETNs are often used to securitize specific investment strategies.

As the name suggests, ETFs are exchange-traded securities. This means that trading takes place on regulated Stock exchanges held.

An ETF automatically replicates an index and buys the securities contained therein in the corresponding number of shares. In the case of a classic investment fund, the fund company or the fund manager decides which shares are purchased at what time and in what volume. ETFs are characterized by the fact that the TER (Total Expense Ratio) - i.e. the total costs - are usually well below one percent (often < 0.1 %).

Equity ETFs usually buy the shares they contain directly in order to replicate the index. In this case, one speaks of physical replication. In addition to physical ETFs, there are synthetic ETFs, also called swap ETFs. Here, the ETF provider hedges itself via a swap (an exchange transaction) with a financial institution and thus replicates the index indirectly. This offers the advantage of more efficient and cost-effective index replication, especially in illiquid markets. While a physical ETF is collateralized by the shares it contains, a synthetic ETF has a theoretical residual risk in the event of bankruptcy of the swap counterparty. In practice, various safeguards are taken to reduce the risk of a synthetic ETF. In addition, the counterparty risk is limited by law to only a small portion of the fund's assets.