Exchange Traded Funds (ETFs) are index-tracking funds which are listed and traded on a stock exchange.

Exchange Traded Commodities (ETCs) are simple and transparent securities that enable investors to gain exposure to commodities without trading futures or taking physical delivery.

• Lower costs - No Stamp Duty which saves 0.5% when compared to UK listed equities.
• Liquidity - Continuous pricing enables investors to trade quickly and efficiently.
• No Minimum Investment - Allows even the smallest portfolios to achieve broad diversification.
• Shorting opportunity - The potential to make money even in a falling market.

• The risk associated with particular ETFs or ETCs correspond to the risks and volatility of the asset subclasses they are tracking.
• Currency - Some products are traded in foreign currency. Therefore exchange rates and credit worthiness of the currency adds risk.
• Climate - Economic and Social instability will play a huge role in some products. E.g. Emerging Markets

Rebalancing portfolios and adjusting investment strategy

The flexibility and range of products available means asset allocation and strategy decisions can be executed quickly and cheaply. An investor is able to achieve broad exposure to equity, bonds and overseas markets. Subsequently rebalancing can take place in just a couple of transactions.

Core / Satellite strategy

ETFs and ETCs can be used to build well diversified portfolios. Obviously, investors can not be expected to follow every instrument in every market. Using these products investors are able to adopt different investment strategies to suit their requirements. The Core and Satellite approached has proved very popular.

The Core is made of securities based on traditional benchmarks such as the FTSE 100 or S&P 500. These passively managed holdings will account for the majority of the investments, are considered essential to the structure of the portfolio and will rarely be changed.

The Satellite in contrast is built of more actively managed securities which an investor will use to specialise in certain, topical areas with a view to enhancing returns.