The popularity of investing in ETFs is currently booming and peaking among investors due to the desire to diversify investments, reduce risk, and growing interest in selected industries or market sectors. The sharp increase in the number of ETFs came in 2020, after the start of the pandemic. Furthermore, the pace of new fund creation accelerated in 2021 and the trend doesn't seem to be slowing down, with the ETF market now worth more than $7 trillion USD.
An Exchange Traded Fund (ETF) is a type of security that tracks a sector, index, commodity or other asset. ETFs can be bought or sold on an exchange in the same way as regular stocks. The design of an ETF remains arbitrary and depends on the strategy of its creators. And in this way, an ETF can track anything from the price of a single commodity or a few stocks to a large and diverse collection of securities. ETFs can also be structured to provide exposure to precious metals such as gold and the commodities sector. ETFs are called exchange-traded funds because they are traded continuously on stock exchanges just like corporate stocks.
ETFs possess certain distinguishing characteristics that make them suitable for both experienced investors as well as complete novices. Some of the most important ETF traits are:
Flexibility - ETFs can be conveniently traded on the stock exchange, just like e.g. stocks.
Real-time pricing - you always know current status of the transaction, because ETFs are listed on the exchange
Diversification - buying one ETF can allow you invest in several different stocks and even in whole index at once
Low costs - management fees are incomparably lower than in the case of classic funds
Transparency - you know exactly what you are investing in, because all information on each ETF is available