Lydia vous explique les ETF

ETFs: who are they? Where they come from ? What do they want from us?

EFT? No, nothing to see. NFT ? Somewhere, it’s also an investment but it’s not even that (maybe we’ll talk about it in a future article). ATF? Always not. No, today we talk about ETFs, however Exchange Traded Funds. Aren’t you more advanced? OK, let’s develop.

Starting with telling you about their “dad”: John Bogle. The American investment tycoon, founder of Avant-gardefinance expert, writer and philosopher, will be remembered (and in equity portfolios) as the man who invented ETFs in the 1990s to “provide small investors with an affordable, diversified investment solution that could hold for the whole life.

But concretely, what is an ETF?

Above all, it is a fund. An investment fund. To sum it up: a large envelope in which you and other investors will pool your money and which a qualified professional will handle for you. Its goal? Make it fruitful! Especially with investment products that you wouldn’t have had access to otherwise. So far, nothing new under the sun.

Where it is a little different is that it is a continuously traded fund and therefore trades like any stock. Practical: You buy easily and just as easily resell, if you want to get your money back in seconds. This is its great strength.

It is also an “indexed” fund. That is to say that the manager, instead of bothering to observe, analyze, anticipate and choose carefully selected assets, will simply invest a little money in all the values ​​of a financial market, which will have the effect of replicating the index.

Take the case of a CAC 40 ETF. Since it is roughly an investment in each of the 40 French companies that comprise it, the price of your CAC 40 ETF will logically increase if the CAC 40 rises and falls in the same proportion if the CAC 40 falls. In short, an ETF is like a basket of shares that allows you to invest simultaneously in all the values ​​of a financial market and that follows the trend of the latter.

It’s okay, but what’s the point?

First, its price! Since the management of the fund consists in investing in all the securities of a financial market – in an almost automated way – the management fees are necessarily lower than in a traditional investment fund. With our tight spreads, this is what we strive to keep our trading service (and also with our interface it is very easy to access these baskets of shares)!

Then it is convenient. In a single purchase order, you can invest in dozens or even hundreds of companies. So, all at once! To easily diversify your investments, we haven’t found any better yet. And there are plenty of ETFs to stick to for your goals or values. “Emerging countries” ETFs, “World” ETFs, “S&P 500” ETFs that will focus on the 500 largest American companies … But also more “thematic” ETFs, on topics that interest you, such as medical research, the mobility of tomorrow or even artificial intelligence. You will surely find happiness.

Finally, those who say “diversified” often say “less risky”. So, we can’t say it enough: any investment presents a risk of capital loss. But with ETFs the risk is more “diluted”, more distributed. One or more companies in the index in question may dive: those with good results will compensate for this poor performance and the value of the ETF will be less affected. Especially if your ETF tracks an index that includes many companies. It is therefore an accessible and diversified investment product, while remaining easy to use.

So is it the perfect investment?

No. There is no perfect, risk-free investment. And ETFs are no exception. Especially since here we have explained to you the basic principles of the simplest and most well-known ETFs: the ones we offer with our trading service and which are appreciated above all in the long term, with management comfortable passive.

But there are more complex ETFs, backed by more reserved indices, that come with a lever, with less transparent management and often higher than average fees (and what we offer). They may give you better short-term performance, but logically they carry more risk.

You are free to discover them later, on your side, if you feel like it. We remain true to our principles: to offer you the most practical and easily accessible products, including financial ones. And there is already a lot to do.

Start trading with Lydia

Leave a Comment

Your email address will not be published.