Exchange traded products

Exchange Traded Funds (ETFs)

Most ETFs track a particular stock index, such as the S&P 500, for example. You can now choose from an increasingly wide range of ETFs, covering various sectors and regions, and suiting different investment strategies and styles.

At IG, we offer a comprehensive range of ETF CFDs, across indices and commodities.

An ETF based on an index is rather similar to an index tracker, but whereas an index tracker can only be traded once a day, an ETF features continuous pricing throughout the trading session. This makes it easier for you to target a particular price, as the value is moving throughout the day rather than just being set at the market close.

Exchange Traded Commodities (ETCs)

An ETC works in almost exactly the same way as an ETF, but in this case tracking commodities rather than indices.

Some ETCs directly track the performance of a specific commodity, such as gold or oil, while others may track an index of diversified commodities. For example, there are ETCs based on the Deutsche Bank Liquid Commodity Index, which gives a general impression of commodities strength across various sectors.

Generally, an ETC might appeal to you if you have a strong risk appetite, purely because commodities such as metals and energies tend to be more volatile than stock indices.

Summary of ETP types

Exchange traded funds (ETFs) and exchange traded commodities (ETCs) are the two most common types of ETP, but there are several other product types to bear in mind.

 

ETFs

ETFs typically track a particular stock index, like the FTSE 100 or S&P 500, for example. They are available on a wide range of indices, covering various sectors and regions.

ETCs

ETCs work in the same way as ETFs, but track commodities rather than indices. They can track a single commodity (e.g. Gold) or a bundle of commodities (e.g. Industrial Metals).

Bond ETPs

Bond ETPs can be popular in times of recession, when investors tend to favour the relative safety of government bonds over potentially more volatile equities. For example, the iShares Euro Inflation Linked Bond Fund offers exposure to inflation-linked bonds issued by European governments.

Currency ETPs

Currency ETPs are designed to track particular scenarios related to international currencies. For example, the PowerShares DB US Dollar Index Bullish Fund replicates a long position on the US dollar against a particular bundle of foreign currencies: EUR, JPY, GBP, CAD, SEK and CHF.

Leveraged ETPs

Leveraged ETPs actually aim to yield greater returns than the underlying markets they are tracking. They are designed to make returns on a daily basis, and may not be suitable for long-term positions.

It is important to bear in mind that the potential for multiple profits also carries the potential for multiple losses.