Why are there ETFs in my investment planet?
ETF – what, why?
With your investment planet, Selma invests in exchange-traded funds or ETFs. These ETFs have several advantages, which is why we ❤️ them:
With one single ETF you can buy hundreds of stocks or bonds and so quickly spread out your risk.
Other than common mutual funds, ETFs focus on tracking a specific index e.g. the SMI®. SMI® is Switzerland's major stock index containing the 20 largest Swiss companies. Because ETFs follow indexes, they are more predictable in their actions. This also reduces costs and risks in comparison to actively managed funds.
Low in costs
The total costs of ETFs are 0,01 – 0,99% TER per year are. TER stands for total expense ratio.
These costs are significantly lower than the ones of mutual funds that can be as high as 6% (Swiss Fund Data). As ETF’s track a certain index rather than trying to beat it, they can reduce costs like management fees, shareholder accounting, service fees or marketing costs.
Intraday tradabilityIt might take several days to buy and sell mutual funds. ETFs are traded on a stock exchange. Because of their higher liquidity, it's much easier to sell and buy them daily.
It's nice to know what you're getting. Compared to mutual funds, ETFs are more clear on what kind of stocks, bonds or commodities are in it.