ETF enthusiasts describe them as a cheap way of getting exposure to equity markets. They do not levy front-end charges, early redemption penalties or exit charges and annual servicing charges are often below 0.5 per cent a year.
With ETFs the share price moves in line with the index they are designed to replicate. The price at which you buy or sell is close to the value of the underlying assets of the share. If the FTSE 100 goes up by 5 per cent, so will an FTSE 100 ETF.
When financial products get more complicated you get the impression that the only souls to gain are those behind the scenes, rather than investors.
Justin Urquhart Stewart, from Seven Investment Management, recently remarked that the ETFs used to be simple but that "our industry has a wonderful tendency to make things astonishingly complex. Some of these ETFs are now getting to the point where they are basically saying 'this is very clever, so trust me'".
And when products get too clever by half, investors should start to worry.
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