ETFs

pat_sexy

Hi y'all

Exchange Traded Funds,

How are they different from investment trusts.

Are they avail. as ISA

Tanx

mad

Hi copied this from the Best Invest website

http://bestinvest.co.uk/fmpro?-db=sitesearch.fp5&-lay=search&-format=searchres.htm&-max=25&-error=searchres.htm&-token=exchange%20traded%20funds&keywords=exchange%20traded%20funds&-find

Exchange Traded Funds ("ETFs") are a special type of vehicle listed on the London Stock Exchange to provide a low cost and simple way of tracking a number of indices. There is no initial charge (other than broking commission), or stamp duty and the annual charge in most cases is just 0.35%.

ETFs combine the best features of open and closed ended funds. Unlike investment trusts (e.g. Tribune Index shares) the share price of an ETF should always be closely in line with its underlying asset value. This is achieved by allowing large investors on a daily basis to redeem or create shares at net asset value. It is, therefore, unlikely that any material discount or premium will arise because this would provide a risk free profit for the institutions.

ETFs pay dividends (usually on a quarterly basis) and are eligible for self-select PEPs and ISAs. The most popular ETFs track the major indices: FTSE100 (Epic Code: ISF), S&P 500 (IUSA) and FTSE Euro 100 (IEUR), but there are also sector variants for investors who want to use more sophisticated portfolio techniques. The majority of ETFs are called iShares - this being the brand name used by Barclays Global Investors.

Hope this helps

cheerfulcat

ITs can and do trade at premiums or ( more usually ) discounts to their underlying "worth" ( Net Asset Value or NAV ). ETFs are pure trackers and track the chosen index fairly closely so the price of the shares reflects the NAV. The prices of ETFs are closely controlled though not guaranteed.

Yes, ETFs may be held in an ISA. Squaregain make no commission charge for trading ETFs within their ISA and there is no stamp duty payable.

HTH

Cheerfulcat

Edited to remove incorrect/misleading information

hobbesandco

Am I also correct in thinking that with an index-tracker you have the choice of automatically reinvesting dividends at no additional cost but with ETF's reinvestment of dividends is not automatic and you would have to collate dividends and reinvest back into the ETF as a separate purchase?