ETFs have become a trillion-dollar-plus trading instrument allowing investors to bet on the rise or fall in price of a vast range of commodities, indices and currencies without actually having to buy the assets themselves.
… particularly worried by so-called “synthetic” ETFs, which instead of tracking an index such as the FTSE or a basket of commodities, use derivatives to gain exposure, with risks passed on to third parties.
These contracts are not as transparent as we would wish, and there is a danger counterparties could go bust. I am not sure investors realise the risks involved.
Find out in the Guardian why ETFs may not be everyone’s cup of tea.
Many people have the misconception that ETFs are Index funds and are “low cost” instruments. This blog entry from Terry Smith – ETFs – you were warned, should give you greater insight on what ETFs are not.
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