Or exchange – traded funds, for its acronym in English ETF (Exchange Traded Funds) are one of the fastest growing financial products have experienced in recent years. Its origins date back to 1993, when the first ETF was launched in the United States, referenced to the popular S&P 500 stock index.
ETFs are financial products that could be considered hybrids between mutual funds and stocks , since they have characteristics of both. On the one hand, an ETF is a basket of securities that are listed on the market, and that are usually referenced to indices such as the aforementioned S&P 500 or, in the case of Spain, the Ibex-35. In this case, the ETF would replicate the composition of the Ibex-35 and its profitability would be linked to the profitability of each of the shares that make up the Ibex-35.
In the operation , the ETF works like stocks . It can be bought and sold with the same ease as these, several times a day and in real time. The ETF also has a net asset value just like mutual funds. This value will be linked to the price and will be determined at the close of the day.
Main characteristics of ETFs
- Liquidity : Exchange traded funds are traded in real time, and are much more liquid than a common mutual fund. An investor can invest and divest from the same ETF multiple times a day during trading hours.
- Transparency : The investor can know the value at which the ETF is traded at any time of the day.
- Commissions : The management and deposit commissions are usually lower than those of a traditional investment fund, since in the case of ETFs, what is carried out is passive management replicating an index. However, the investor will have to assume other types of costs, such as those derived from operating with a securities account and brokerage commissions on the stock market, as occurs when shares are traded.
- Taxation : The taxation of ETFs is similar to that of stocks. The difference between the amount obtained in the sale and the amount paid in the purchase of an ETF is a capital gain / loss that is integrated into the tax base of savings. The rate to be applied will range between 19% and 23%. Unlike investment funds, in the sale of ETFs there is no withholding tax on capital gains. Also unlike these, ETFs are not subject to tax exemption for the transfer of shares, from which traditional funds do benefit. There is therefore no tax deferral.
- Dividends : Some ETFs offer dividends that are paid with varying periodicity, from the shares that make up the index to which it replicates.
As with any other investment decision, the interested party has at their disposal and should consult the information brochure , in which they can find out about the investment policy of the ETF, the fees that apply or the risk profile.