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What are ETFs or trackers?

What exactly are ETFs? ‘ETF’ is an acronym for Exchange Traded Fund. These funds are also referred to as ‘trackers’ as they are designed to follow – or 'track’ – an entire index. Read on to find out what ETFs are all about, the pros and cons entailed and the cost involved.

ETFs explained in plain language

An ETF, or tracker, is a fund designed to invest in an entire index, which is a collection of shares or bonds, such as the BEL 20. The BEL 20 index consists of the 20 largest listed companies in Belgium.

When you invest in an ETF that tracks the BEL 20 index, you invest a small amount in each of these 20 companies. You can also invest in ETFs that track the 100 largest technology or healthcare companies. The broadest ETFs even try to track all financial markets worldwide, allowing you to invest in virtually every country and sector.

Why invest in ETFs?

Trackers are a great way to invest in a highly diversified portfolio, as you spread your eggs across several baskets and can basically sit back and let them take their course. This is why investing in ETFs is also referred to as passive investing.

Active investing, on the other hand, involves personally selecting shares and trying to buy and sell them at the right time. Alternatively, you can have a fund manager actively change the composition of your investment fund.

The aim of active investing is obviously to achieve the highest possible return. This naturally requires some basic knowledge and a certain time investment. And as it is so difficult to predict which companies will perform well in the future, most active investors achieve only slightly lower returns than the market in general. Historically speaking, investing in ETFs automatically puts you in the better half of all investors.

The popularity of ETFs is attributable to a number of attractive features:

  • ETFs allow you to invest small amounts in thousands of companies, without having to buy an individual share in all of these companies.
  • You can buy, add and sell ETFs on the stock market at any time.
  • ETFs generally cost a lot less than actively managed investments funds.

Investing in ETFs with Bolero

If you’re looking to invest in an ETF, why not check out KBC Brussels’s online investment platform, Bolero, where you can open an account free of charge to invest at attractive rates. You might like the Bolero ETF playlist, which includes over 50 different trackers. If you select an ETF from this list, the transaction charges (also referred to as ‘broker’s fee’) for purchases up to 250 euros are just under 2.50 euros. Check it out now.

Invest with Bolero