All about ETFs – snowball investing with collective funds

ETFs, or Exchange Traded Funds, are simply funds, which can be bought and sold like shares on the stock market. Most people think of funds as collections of shares, which are carefully chosen by professional managers for their special attractions as investments. This style of investing is known as active management. ETFs are not like that. They are designed to replicate the performance of the index, which they are tracking. This is cheap to do because you only need a computer so costs are low. This style of investment is known as ‘passive’ management because the managers hardly need to do anything and are just responding to changes in the index they are tracking. It is a style of investment, which has become very popular in recent years as investors have noticed that most active managers underperform, while charging high fees. There is an incredible wealth of ETFs out there, literally 1000s specialized on different markets by geography, sector, investing style and level of risk. They lend themselves very well to the Quentinvest strategy; hence my decision to set up Quentinvest for ETFs. It is strategically identical to Quentinvest for Shares (few sales and additional purchases on follow-up buy alerts). It is cheaper because less research is needed, diversification comes built in and the performance will be less volatile. Vis-a-vis the shares option there is a trade off – ETFs carry less risk but offer less potential reward though it should still be possible to do very well. Personally I shall be following both strategies – shares and ETFs.

All trading involves risk. Losses can exceed deposits. Quentinvest provides information only and subscribers should seek financial advice before acting on any recommendations. Past performance is not a guide to future performance.