What is an ETF?

Characteristics

Update : Oct. 29, 2012

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What are the features of an ETF?

What are the features of an ETF?

[Feature 1] Easily understandable!

  • ETFs are managed by an investment company to track an indicator, such as a stock price index, like TOPIX (Tokyo Stock Price Index) or the Nikkei 225, or commodity prices.
  • Because information on the indicator is reported daily by the news media and other organizations, price movements and changes in profit/loss are easily grasped. Furthermore, since the corporate analysis required for investing in individual stocks is unneeded, ETFs make for a beginner-friendly product.

[Feature 2] Facilitate diversified investment!

  • Because the underlying assets are widely diversified, ETFs are said to lower investment risk. For example, purchase of an ETF linked to TOPIX is expected to produce the same investment performance as holding all of the issues listed on the TSE’s 1st Section.
  • There are a rich variety of ETFs in addition to Japanese stocks, including those tracking foreign stocks, REITs, and commodities indices. By combining ETFs which track different prices, it is possible to achieve internationally diversified investment.

[Feature 3] Low initial investment! Low costs!

  • When investing in individual stocks, tens of thousands or even millions of yen are generally required, however with ETFs, initial investment is possible with several thousands or tens of thousands of yen.
  • Management costs of 0.1 – 1% are generally lower than those of investment trusts including index funds, and ETFs are said to be suited for long-term investment. Trading costs are the same as those for listed stocks.
What types of ETF issues are there?
Please refer to the following page for a list of ETFs listed on TSE.

Listed ETFs

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