With investors in the UK putting tens of billions of pounds into ETFs and the choice growing all the time, they’re fast becoming one of the leading ways to invest in shares, stock markets and more!
The ETFs we invest in are simple buy-and-hold investments, which passively track the performance of an index or pool of investments. Index-tracking ETFs do not attempt to beat the market like an active fund; rather, they try to be the market.
ETFs have very low fees because tracking an index is inherently less expensive than active management. They are also tax efficient and not subject to 0.50% stamp duty, which is charged on most UK share purchases.
Here are 5 reasons why ETFs can be a great choice for your portfolio:
1. An easy way to invest in the stock market
Instead of trying to pick the best-performing shares in the stock market — which even the professionals struggle to do — with ETFs you’re invested in every share in your chosen market. Most ETFs simply aim to match the performance of a market index like the FTSE 100 (the ‘Footsie’), and generally do a pretty good job.
2. Less risky than investing in individual shares
Individual shares are volatile, and companies can go bust. However, with ETFs you’re buying into investment funds which commonly hold hundreds of different shares or bonds. This spreads investment risk in your ISA.
3. Shares, bonds, gold, climate change & more!
ETFs offer a huge range of choice for your ISA, from individual stock markets like the FTSE 100 or S&P 500, to regions such as Europe or Asia, to global market exposure. There are also ETFs for bonds, commodities like gold, and investment themes such as climate change or digitalisation. Plenty of ways to build the ISA you want. See InvestEngine’s range of hundreds of ETFs
4. Low costs
ETFs have some of the lowest investment costs around, so more of what you make goes in your (tax-free) pocket rather than someone else’s. The annual management charge on some ETFs is as little as 0.05% — equivalent to just 50p a year on a £1,000 investment to own some of the world’s biggest companies! That’s a fraction of the charges you could be paying with traditional investment funds such as unit trusts, OEICs and investment trusts.
5. NO stamp duty
With most share purchases in the UK, investors have to pay 0.5% stamp duty — even in an ISA. But with ETFs there’s no stamp duty. This additional tax saving gives your ISA investment a head start because you’re not losing half a percent of your money upfront.