You work hard for your money. Investing helps your money work for you. By investing over the long term, many people aim to grow their savings and work towards future goals.
What you’ll learn
In this article, you’ll learn:
01.
What ETFs are and how they work
02.
How ETFs track markets and indices
03.
Why ETFs are popular with investors
04.
The main benefits of ETFs
05.
The different types of ETFs available
What is an ETF?
An ETF (exchange-traded fund) is a single investment that holds a range of assets, such as shares, bonds or commodities. By buying one ETF, investors can gain exposure to many investments at once.
Like shares, ETFs are traded on stock exchanges during market hours. This makes them a simple and accessible way for investors to invest in diversified portfolios.
How do ETFs work?
Most ETFs are designed to track an index. An index represents a specific market or group of investments.
Common examples include:
- S&P 500 – tracks 500 of the largest companies in the US
- MSCI World – tracks companies across developed markets worldwide
- FTSE 100 – tracks 100 of the largest companies on the London Stock Exchange
You cannot invest directly in an index. Instead, ETF providers, such as iShares, create and manage ETFs designed to replicate the performance of an index as closely as possible. This gives you a practical way to invest in that market.
In short: the index sets the direction, and the ETF follows it to replicate the performance of the market.
Why are ETFs popular with investors?
Millions of investors use ETFs to access financial markets.¹ Here are six key reasons:
1. Diversification
With a single ETF, you can invest in many different assets. This spreads your investment across multiple companies, sectors or regions.
2. Easy access
ETFs make it simple to invest in entire markets, specific regions, industries or sectors, different asset classes.
3. Lower costs
ETFs typically have lower ongoing costs compared to many other investment products. Lower costs can help investors retain more of their returns over time.
4. Liquidity
ETFs are traded on stock exchanges throughout the day. This means they can be bought or sold during trading hours.
5. Transparency
ETFs regularly disclose their holdings, allowing investors to see which assets are included and how the ETF is structured—providing clear visibility into their investments.
6. Simplicity
ETFs combine diversification, accessibility and transparency in a single product. This makes them easy to understand and use, especially for beginners.
Diversification does not fully protect against market risks.
Capital at risk: The value of investments and the income from them can fall as well as rise and are not guaranteed.
The different types of ETFs
The ETF market is broad and offers many options, including:
Broad market ETFs
For example global indices like MSCI World.
Regional ETFs
Focused on specific countries or regions.
Sector ETFs
For example technology and healthcare.
Thematic ETFs
Focused on long-term trends such as AI or clean energy.
This flexibility allows investors to build portfolios that match their goals and time horizon.
In short: ETFs offer solutions for different investment strategies.
Frequently asked questions
Conclusion and keys takeaways
A simple way to invest
ETFs have become a popular way to access financial markets. By combining diversification, ease of use and broad market exposure, they offer a practical starting point for many investors.
01.
ETFs provide diversified exposure through a single investment
02.
They track indices to replicate market performance
03.
They offer accessibility, transparency, and flexibility
04.
They are used for long-term investing
Ready to start investing?
Getting started with investing doesn't have to be complicated. With a clear plan and a long-term perspective, even small steps can make a difference over time. Many investors begin with a few simple steps:
Define your goals
Consider what you want to achieve and how investing fits into your plans.
Open an investment account
You'll need an investing account with an online investment platform, bank or provider.
Choose a suitable investment approach
A diversified portfolio may include equities, bonds and ETFs.
Start investing regularly
Investing gradually over time can help manage market fluctuations.
1Source: BlackRock/YouGov, People & Money – The next wave of ETF investors, November 2025
Risk Warnings
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Important information
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