Exchange Traded Funds

Question 1

What is a ETF in it’s simplest form?

Answer 1

A tracker

Question 2

What is the difference between an ETF and a UT Tracker?

Answer 2

UT has one price point per day. ETF allows buying and selling instantly. Real time.

Question 3

Are ETF on the stock exchange?

Answer 3

Yes

Question 4

Open or closed ended?

Answer 4

Open

Question 5

What sort of funds and how varied?

Answer 5

Everything from FTSE tracker to tracking price of wheat and orange juice. Can be very specialist.

Question 6

What fees are and are not applicable?

Answer 6

Low ongoing costs

No stamp duty

Stock broker fees will apply

Question 7

What are the four main methods that an ETF would use to track an index ?

Answer 7

Full Replication
Sampling
Optimization
Synthetic

Question 8

What is full replication?

Answer 8

Track index entirely with correct weightings

Question 9

What is sampling?

Answer 9

Buys some / a sample of the index

Question 10

What is Optimization?

Answer 10

Computer modelling

Question 11

What is synthetic?

Answer 11

Uses derivatives (asset not physically owned)