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ETF

What is an ETF?

ETFs, or Exchange-Traded Funds, are investment products that aim to replicate changes in an underlying financial index, both upwards and downwards, after deducting management fees. These indices may be composed of equities, bonds or commodities and may be invested in different geographical areas. Also known as trackers, index funds can be traded on the stock exchange like equities throughout the day during market hours. Their price is therefore constantly changing in line with changes on the markets/indices concerned.

Find out more about the ETFs in our BNP Paribas Easy range in this educational video:

What are the main risks of ETFs

ETFs are sensitive to the rise and fall of the market index they replicate.

For example, there are several categories of risk, such as:

  • Risk of capital loss: because investments in funds are subject to fluctuations in the market replicated by the ETF, investors may not get back their entire investment.
  • Currency risk: present in every fund that has assets denominated in a currency different from that of the fund itself.

What are the benefits of ETFs?

Their continuous listing on the stock exchange allows investors to react quickly on the financial markets, both when buying and selling.

In addition, since they replicate an index of several dozen or even several hundred securities, they facilitate portfolio diversification.

Find out more about the opportunities and risks of investing in ETFs with the BNP Paribas Easy educational programme:

How to choose them?

There is a wide range of underlying indices that allow exposure to a specific geographical area, industry sector or theme. The choice of index determines the type of assets held by the ETF. All asset classes are covered by these indices, which can be global (World, Asia, Europe) or country specific.

Like equities, ETFs have an international identification number (ISIN code), which simplifies the placing of orders.

What are the costs of ETFs?

ETFs do not incur entry or exit fees where they are traded on the stock market. They have an annual management fee, which can vary on average from 0.15% to 0.40%.

In addition to the annual management fee of the ETF, order placement is subject to the usual brokerage fees of each financial intermediary.

How are orders taken?

Through your financial intermediary, in the same way as for equities.

It is possible to invest in ETFs listed in the Euro, US Dollar or other currencies such as Pound Sterling or Yen. ETFs managed in foreign currencies generally offer net asset values in Euros and are therefore accessible on ordinary Euro accounts.

What are the best practices before investing in ETFs?

To learn more, watch this video on the golden rules of ETFs: