Pros & Cons

Advantages of ETFs:

• ETFS are listed companies on the London Stock Exchange with secondary market on SETS. Being open-ended, there is no danger of over-supply of shares as ETF managers always stand ready to buy.
• They trade at, or very near to, net asset value and track the index closely.
• They can be traded at real-time prices throughout the day.
• They incur low management and other costs (which are transparent)
• No stamp duty payable.
• They can be held in an ISA to save tax.(For UK residents)
• They can be bought to gain exposure to foreign markets cheaply
• ETFs offer a much wider choice of markets to track than unit trusts trackers, ranging from Brazilian shares to commercial property and hedge funds.

Disadvantages of ETFs:

• Stockbrokers’ fees can eat into profits of frequent traders.
• No sales commissions are paid to commission based financial advisers for recommending ETFs so they don’t push them -despite ETFs being ideal for many investors.
• If the ETF provider does not buy the underlying securities, but instead relies on derivatives, and then goes bust, it could be more complicated to receive what is due to you.