You may be asking what are ETFs? This article will clear that up for you and begin you on your way to learning about ETFs and just how useful they are in today’s financial climate. With access to the Internet and busier lifestyles ecommerce has become a way of life for current society. Nowadays if we have a need for something the first we do is head onto our phone and search for it there. This has a huge impact on the market, reducing the need for a physical store and putting more importance on the web-based retailers. Due to this sometimes retail investors can be missing out on just how useful ETFs can be to them.
What are ETFs and how do they relate to retail?
An ETF is an exchange traded fund, which means it is an investment fund traded on stock exchanges, pretty similar to stocks themselves. It holds assets such as commodities, bonds and stocks and tries to stay as close to its net assets value as possible, but sometimes deviations can occur which change this. They are simple and low cost making them an ideal option for investors. So what is holding them back? Education on the subject when it comes to retail investors and that it is difficult to invest in. Due to this retail is missing out on a huge investment opportunity. Read more!
Why is it so difficult?
We have established previously the reason why it is difficult, the lack of knowledge about this platform. When a retail investor is trying to decide how to invest they normally go to a platform or an independent financial adviser. This then becomes a problem as a majority of the platforms offer only a few ETFs and advisers don’t tend to include them in their portfolios. The reason behind this lies with the technology, ETFs aren’t available on platforms that IFAs use, making them harder to access for the majority of the users.
Whilst ETFs have both lack of education and lack of access going against them, they also have somewhat of a bad reputation too. ETFs gained a bad reputation and were incorrectly blamed for the financial crisis. Although they were not responsible for the crisis, the damage had already been done and those three letters etched into the brains of thousands of financial advisors. So if ETF investing wasn’t already difficult enough for them to make headway in the market then with this going against them, then even more so.
In conclusion, if we want ETFs to become more commonplace, not only does more information have to be made accessible to the public and to companies but it also has to be simplified so that possible investors don’t leave with their head fried. We also need to take a look at the systems so that ETFs turn up in more searches than they currently are. As with everything in life, education is key, and with education ETF investing might just be the way forward for retail. Click here for more information: https://www.investopedia.com/terms/e/etf.asp