An Exchange-Traded Fund, or ETF for short, is an investing fund that typically tries “replicate” some index, like the S&P 500 or the AEX. To do this, all the fund has to do is invest in the stocks that comprise the index in the right proportions. When you invest in a classical mutual fund, you simply give the fund your money, which they then proceed to invest on your behalf. On the other hand, the name exchange traded fund already reveals that shares in an ETF can be bought and sold just like other equity securities like common stock.
Shares of ETF’s come in different forms and flavours. For example, the below screenshot shows the results when I filter for an ETF from iShares that replicates the S&P 500 (Note the green arrows). As you can see there are 15 results!
Does this mean that iShares has 15 S&P 500 funds? Intuitively, you would expect that iShares only has one S&P 500 fund right? It wouldn’t make sense for them to have 15 different S&P 500 funds. This is technically true – all the results you see are in fact shares for the same ETF (Namely the iShares Core S&P 500 UCITS ETF).
The reason that there are so many results is that shares of ETF’s come in multiple distinct flavours. Note the red arrow in the screenshot. As you can see, there are all these codes like FRA, MIL, and LSE. These codes stand for different stock exchanges around the world. For example, MIL denotes the Milan stock exchange, FRA denotes the Frankfurt stock exchange and LSE denotes the London stock exchange. Companies can have multiple notations around the world, to be easily accessible to all investors. For example, shares of Tesla can be traded on the NASDAQ stock exchange (in dollars) as well as on the Frankfurt stock exchange (in euros). In the same way, shares of an ETF can trade on different stock exchanges – hence explaining the reason why there are so many results.
However, this explanation does not account for all results. The attentive reader might have noticed that some stock exchange codes (For example LSE and EAM) occur multiple times in the list. The reason for this is that there are more subtle differences alongside the difference in stock exchanges. Note the blue arrow in the screenshot. See the (Acc) Behind the ETF name? This stands for accumulating. A distinction can be made between accumulating and distributing ETF’s. Distributing ETF’s distribute dividend, and in accumulating ETF’s dividend is automatically reinvested (accumulated) for you. Both have their merits and it is important you understand the distinction. Apart from this distinction, even more flavours of ETF shares exist! For example, some ETF’s come with options to be currency hedged. Simply said, this you with the option to limit currency risk exposure. Summarizing, many ETF shares come in many different types and flavours, and this is the reason why you can get many results when looking for a specific ETF! Always take care, and make sure you understand exactly which share you are buying.
I use DeGiro. I think it is a well-established broker with low fees and plenty of features. You are, of course, free to use any broker you want. Take care though! Many companies (Such as RobinHood and Bux) advertise with zero transaction fees. Even though they technically do not charge transaction fee, they have other ways of profiting from your trades. Nothing in life comes for free, stock brokers are no exception!
Read more about currency in this in this blogpost.
In that case, you need to make changes to the investing strategy I provide. For example, you can limit your exposure to equity ETF’s (ETF’s that invest in stock indices, like the S&P500 ), and swap them for “safer” investments like bonds or dividend growth companies.