An Exchange Traded Fund (ETF) is an index fund or basket of securities that are listed and traded on the stock exchange like shares. ETFs can be bought or sold through a brokerage firm registered on the exchange and are offered on virtually all asset classes, which range from traditional investments to alternative investments, like commodities or currencies.
Who can invest in ETFs?
- Investors who do not have the time to monitor the stock market and are looking for means to diversify their portfolios.
- Investors who want benchmark returns at minimal costs.
- Investment experts who seek efficient access to other markets and asset classes.
Despite the fact that the Nigerian Stock Exchange (NSE) is the leading ETF market in West Africa in terms of the number of listings, turnover value and market capitalisation, the Nigerian ETF market is still relatively nascent in comparison to the emerging and developed markets.
[Read Also: How I Would Invest My Mother’s Retirement Funds]
In the foreign markets, there are over a thousand ETF products available, offering a great way to increase global exposure whilst tapping into emerging and developed markets. The various types of ETFs include but are not limited to Market ETFs, Bond ETFs, Sector and Industry ETFs, Commodity ETFs, Style ETFs, Exchange Traded Notes, etc.
Advantages of investing in Foreign ETFs
Portfolio Diversification and Efficient Asset Allocation
Have you ever dreamt of investing in Canada or Singapore or Dubai without having deep knowledge of these financial markets? Investing in ETFs offers a great opportunity to do so, as you can just buy a basket of ETFs – stocks, bonds or REIT indexes in a single online brokerage account of yours and track your asset allocation with the click of a button on your phone or laptop.
With ETFs it is also very simple to rebalance your portfolio anytime you want to buy, sell, or short a stock.
Low Costs
Compared to mutual funds, ETFs have lower costs because they are not, for example, required to send in monthly statements, notifications, and transfers to clients.
Fund sponsors are responsible for providing that information only to authorised participants who are the direct owners of creation units. The reduced administrative burden of service and record keeping for thousands of clients means that ETF companies have lower overhead costs, and part of these savings is passed on to individual investors in the form of lower fund expenses.
ETFs are also immune to redemption fees which mutual funds charge when an investor wants to liquidate his money.
[Read Also: Akintola Williams, doyen of accountancy in Africa clocks 100 years]
ETFs are not susceptible to fraud
Investing in ETFs is very transparent; hence, the transactions are very easy to track and difficult to manipulate. ETFs are bought and sold during normal trading hours, and the pricing is continuous throughout the day and as such, the bid-ask spread is publicly available, so investors know within moments how much was paid to buy shares, and how much they received after selling.
![TNS Event](https://i.ibb.co/8cBH227/thumbnail-TNS-GOOGLE-RESIZE-300x250.jpg")
How can one go about investing in foreign etfs and reits from Nigeria
Lovely write up. How can one go about this ETF stuff and invest in it (novice)
For me, I would rather trade CFDs. CFDs let me trade foreign shares, oil, and indices from Nigeria. Now that we are in the earning release season when top US equities will be expected to announcement quarterly earnings,CFD gives me the leverage to take advantage of short term trade opportunities.
More info on how I trade US stocks ahead of news via CFD – https://nigerianstockstobuy.com/trade-news-earnings-releases-stock/
How can one invest on ETF?