When it comes to investing in ETFs, there are two ways: on the primary stock market where they are listed or on the secondary market. We’ll explore what an ETF is and how you can invest in one on the EURONEXT exchange in the Netherlands.
What is an ETF, and how does it work?
An ETF is an exchange-traded fund. This type of investment vehicle trades on stock exchanges, much like regular stocks. However, instead of representing shares in a company, an ETF represents a basket of assets. These can include stocks, bonds, commodities or even a mix of different asset types. They are popular because they offer investors exposure to a broad range of assets without purchasing them individually.
Investing in an ETF is similar to investing in a stock. You can buy/sell ETFs through a broker, just like any other security. When you invest in an ETF, you buy shares of the fund. The ETF price will fluctuate throughout the day as the underlying assets rise and fall in value.
How to buy shares in an ETF on the EURONEXT exchange
If you want to buy shares in an ETF listed on the EURONEXT exchange, you’ll need to have an open account. If you would like to learn more about brokers and ETFs offered in the Netherlands, you can get more info here.
Once you have opened an account, you can place a buy order for the ETF just as you would for any other stock.
It’s important to note that not all brokers offer access to the EURONEXT exchange. If you’re not sure whether your broker does, you can check with them directly or look for one that does use an online search engine.
When placing a buy order, you’ll need to specify the number of shares you want to purchase and your willingness to pay. Your order will then be matched with another investor who wants to sell their shares. If no one is willing to sell their shares at that price, your order will remain open until someone is found.
The ETF market in Europe
The ETF market in Europe has increased in recent years. In 2018, more than 1,700 ETFs were listed on exchanges across the continent, with a total value of over EUR 600 billion. It represents an increase of nearly 30% from the previous year.
The vast majority of these ETFs are listed on the London Stock Exchange, with over EUR 400 billion in assets under management. However, the EURONEXT exchange is also home to many ETFs with over EUR 100 billion in assets.
The benefits of investing in ETFs
Many benefits make ETFs an attractive investment for many people. Some of these benefits include:
Diversification- One of the main advantages of ETFs is that they offer diversification. By investing in an ETF, you can gain exposure to a wide range of assets without purchasing each one individually, which can help reduce risk and improve returns.
Cost-effective- Another benefit of ETFs is that they are generally more cost-effective than other investments. You only need to pay the expense ratio, which is the annual fee charged by the fund manager, and this is typically much lower than the fees charged by actively managed funds.
What to consider before investing in ETFs
Before you invest in an ETF, there are many things you should consider. These include:
Your investment goals- The first thing you need to think about is your investment goals. Are you looking to grow your wealth over the long term or generate income? Your answer will help you to choose the right ETF for you.
Your risk tolerance- It’s also essential to think about your risk tolerance. It refers to how much loss you’re willing to accept. Generally speaking, the higher the potential return, the higher the risk. So, if you’re risk-averse, you may want to choose an ETF with a lower potential return.
Some popular ETFs you can invest in on the EURONEXT exchange
Now that you know more about ETFs and what to consider before investing, here are some popular ETFs you can invest in on the EURONEXT exchange:
SPDR Euro STOXX 50 ETF (STOXX)
The SPDR Euro STOXX 50 ETF tracks the Euro STOXX 50 Index, consisting of the 50 largest companies in the eurozone. The fund has an expense ratio of 0.29%.
iShares Core MSCI EM IMI ETF (IEMI)
The iShares Core MSCI EM IMI ETF tracks the MSCI Emerging Markets Investable Market Index. The fund invests in over 2,400 companies across 24 emerging markets. The total expense ratio is 0.14%.