What is an exchange traded fund?
An exchange traded fund is a type of managed fund that tracks a specific index or benchmark, which can include local and international equities, commodities, currencies and bonds. Rather than buying or selling shares in a specific company, ETF traders are trading units in a managed fund. This provides diversification for investors even if they only buy a single unit. In Australia, ETFs are listed on the Australian Securities Exchange and trade in much the same way as an individual share. Ordinary ETFs will typically rise or fall along with the index or benchmark they track, while Active ETFs will be actively trying to outperform the index or benchmark they track.
ETFs vs CFDs
These acronyms can make things confusing fast and both ETFs and CFDs offer low-cost entry options, but the two offer different ways of growing your portfolio. While leveraged CFDs can be fast-moving, high in risk and also high in returns, ETFs are generally slower and a diversified way to invest. CFDs are a more active trading solution, while ETFs are often more suited to the passive investor.
Can you trade CFDs on ETFs?
Yes, you can trade CFDs on ETFs. Although they generally increase in value slowly over time many ETFs also offer daily liquidity, making them one option for CFD trading. Investors must work through an authorised broker to trade ASX exchange-traded CFDs. Here at ForexCT, we do not provide ETF CFDs amongst our options due to the complexity involved. Instead, we focus on offering Contracts for Difference on commodities, currencies, metals, stocks and indices with up to 400:1 leverage. That means you could increase your trade position by up to 400 times that of your required margin to amplify your losses or profits. To begin, you can open a free demo or live account with as little as $500.