Practical ETF ownership

Buying and holding

Understand how to buy an ETF, how income is handled and what affects the price you pay when trading.

27

How do I buy an ETF?

You normally buy an ETF through an investment platform or broker. Before placing an order, identify the exact ETF and share class (the version with your chosen income treatment, currency hedging and fees), check the costs and decide the highest price you are willing to pay.

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28

Market orders versus limit orders: what is the difference?

A market order aims to trade immediately at the best available price. A limit order sets the highest price you will pay when buying or the lowest price you will accept when selling.

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29

When is the best time of day to trade an ETF?

ETF trading is generally clearer when the markets for most of its underlying investments are open. Spreads can be wider near the start or end of the trading day, during market stress or when the underlying market is closed.

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30

Lump sum versus regular investing: what is the difference?

Lump-sum investing puts available money into the market at once. Regular investing spreads purchases over time. The trade-off is earlier market exposure versus reducing the risk of investing everything immediately before a fall.

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31

Accumulating or distributing: what happens to the income?

An accumulating ETF keeps income such as dividends inside the fund and reinvests it. A distributing ETF pays that income to you, usually at regular intervals.

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32

Income from ETFs: where does it come from?

ETF income usually comes from dividends paid by companies or interest paid by bonds. An accumulating ETF reinvests that income, while a distributing ETF pays it to investors.

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33

Rebalancing an ETF portfolio: why and when?

Rebalancing means adjusting investments back towards their intended proportions after market movements cause them to drift. It helps maintain the chosen mix of risk rather than maximise short-term returns.

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34

What happens if an ETF closes?

If an ETF closes, the provider normally sells the fund’s investments and returns the remaining value to investors. Closure does not usually mean the assets have disappeared, but it can force a sale at an inconvenient time.

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