Exchange-traded funds (ETF), also known today as trackers, are tools for investing in stocks. It was introduced in the 90s and is a growing market because it is an interesting and easily accessible tool that provides a strong advantage to investors.
Choosing ETF platform can be a daunting task. So, in this guide, we are covering special features, and advantages of ETF platforms. But above all, we will introduce the top best ETF brokers that have been selected. We also provide a step-by-step guide that shows you how to buy ETF quickly and easily.
This article aims to introduce what ETFs are and how to use them. How you can diversify your portfolio and we will explain how it can help you succeed in investing in stocks.
What is ETF?
ETFs are one of the stock market instruments you can invest in. This means you can buy, sell or trade CFDs. Its characteristic is that it assumes the value of a stock, sector, or index in the bond market. ETFs are called index funds because they follow a stock index as closely as possible. ETFs are funds that allow you to invest in a company or group of bonds more safely and profitably.
Trackers, also known as exchange-traded funds (ETFs), are investment baskets that are traded on an exchange just like stocks. ETFs have different risks depending on the type of fund. Unlike mutual funds, ETFs can be bought and sold during trading days. ETFs provide the diversification effect of mutual funds while mimicking the ease of trading stocks.
How does ETF work in the stock market?
Exchange-traded funds work in a way that represents the specific value of an equity index, which is more important. In this way, the tracker is subject to index fluctuations. H. Its value is based on the value of the stock index on which it relies.
If you look at the CAC 40 ETF, for example, the CAC 40 stock index increases in value when it rises and vice versa. Thanks to this operation, the tracker allows investors to invest in any securities in a single product in a single trade. Therefore, it is a popular product offered by more and more online brokers.
How does an ETF tracker work?
To better understand the tracker, let’s take a look at the Euro Stoxx 50 European Equity Index, one of the largest in Europe. It incorporates companies such as Sanofi, Siemens, and Total.
Euro Stoxx 50 ETFs, such as the Amundi Euro Stoxx 50 (C50) or Lyxor EURO STOXX 50 (DR) UCITS ETF-DIST, outperform the Euro Stoxx 50. This means that it forms all stocks behind all the companies in that stock. index. As a result, you can position yourself in all of these companies at the same time rather than just one. You don’t have to buy each Euro Stoxx stock individually, you get them all in one go. This is probably the easiest way to diversify your portfolio.
Types of ETFs
ETFs can be traded like stocks, but internally they are more like mutual funds and index funds and can differ significantly in terms of underlying assets and investment objectives. Here are some common types of ETFs: Please note that these categories are not mutually exclusive. For example, a stock ETF may be index-based and vice versa. These ETFs are not classified according to the type of investment (passive or active), but according to the type of investment held in the ETF.
These are usually stocks geared towards long-term growth. They are generally less risky than individual stocks, but slightly higher risk than some of the other commodities.
Commodities are commodities that can be bought and sold, such as gold, coffee, and crude oil. Commodity ETFs and trackers allow you to combine these securities into a single investment. It is especially important to know which commodity ETFs are included.
Unlike regular bonds, bond ETFs do not have an expiration date, so they are most often used to give investors regular cash payments. These payments are accrued on interest accruing on individual bonds within the fund. ETFs and bond trackers can be great and less risky additions to stock ETFs.
To build a diversified portfolio, we usually recommend foreign stocks. International ETFs are an easy and generally less risky way to find these investments offshore. These ETFs can include investments in individual countries or specific blocks of countries.
The stock market is divided into 11 sectors, and each sector is made up of companies operating in that sector. Sector ETFs and trackers allow you to invest in specific companies within that sector, such as Health, Finance, or Industry. This can be especially useful for investors who follow a business cycle, as some sectors tend to perform better in times of expansion and others better in times of contraction.
Also read: Our comprehensive guide on Best ETFs to invest in UK.
Best ETF Trading Platforms 2022
Now let’s get to the heart of the matter by discovering the list of ETF brokers we will review in this guide. We will discuss the specific benefits of each of these commercial sites. Here are the top ETF brokers-
Best ETF Trading Platforms Reviewed
The eToro broker is undoubtedly one of the market leaders. eToro is founded in 2007 and it is a fully regulated platform in Europe and also a very reliable broker. This trading platform is especially famous for being easy for beginners to learn, yet providing everything the experienced investor needs. Fees are also a strength of this broker, as eToro does not charge any fees for trading ETFs.
Another benefit is that eToro offers a wide range of products in addition to stock ETFs. For example, you can invest in the best value stocks, cryptocurrencies, commodities, or stock indices. eToro is a global benchmark of social trading that traders of the best investors can automatically replicate.
Some ETFs offered by eToro
eToro offers a total of 269 ETFs. Here are 5 examples of ETFs and trackers available on the eToro platform.
- iShares MSCI All Countries Asia
- Active Pimco Total Revenue
- iShares Core US bonus
- Next Generation ARK Internet
- T-Ticket SPDR 1-3M
Capital.com is an online broker founded in 2016, which, despite its young age, already has a solid reputation and has attracted nearly 2.3 million clients. Safety is also ensured as the broker is based in London and is regulated by the European regulator CySEC.
Another highlight, often recognized by both young and novice traders, is that Capital.com only requires a deposit of EUR/USD/GBP or $250 via bank transfer. On the available markets page, the broker offers nearly 3,000 CFD instruments. You can read our in-depth review of capital.com to learn more about this broker.
Some ETFs from Capital.com
The ETF broker offers about 80 ETFs. Below are five examples.
- Invesco QQQ Trust
- Vanguard Total Stock Market Index Fund
- IShares MSCI Emerging Markets ETF
- Choosing SPDR Funds for the Financial Sector
- SPDR Energy Sector Selection
Libertex Brokers is one of the oldest brokers on the market, founded in 1997. With this longevity, it is easy to say that they are one of the most trusted brokers. With 2.9 million customers in more than 120 countries, the company’s reputation is well known.
Libertex has won more than 40 international awards since its inception, emphasizing the quality of its services and offers. It is also a regulated broker in the EU, more precisely in Cyprus. Libertex offers its developed interface, but also offers trading options via the well-known MT4 platform. Finally, in terms of available markets, the broker offers 250 assets, including 10 ETFs. You can read our in-depth review of Libertex to learn more about this broker.
Some ETFs offered by Libertex
Libertex Broker offers 10 ETFs to expand in the future. Here are 5 examples of ETFs offered by the Libertex ETF broker.
- iShares Core US bonus
- SPDR S&P 500 ETF Trust
- iShares MSCI Germany
- iShares MSCI UK
- Vanguard FTSE Europe
XTB is an online broker founded in 2015 with over 170,000 clients in 13 countries. This broker is regulated by the FCA, the UK financial regulator. But above all, it is one of the rare corridors physically installed in France.
XTB Broker offers over 3000 assets to its clients. You can invest in currencies, indices, commodities, stock markets, and cryptocurrencies. Of course, it is also possible to invest in ETFs with 0% commission.
Some ETFs Offered by XTB
XTB ETF Broker offers over 200 ETFs and trackers. Five of these are described below as examples.
- Xtrackers Dax
- Rixor Euro Stoxx 50
- SPDR S&P 500 UCITS
- iShares Core S&P 500
- Rixor Euro Stokes Bank
Alvexo Broker was founded in 2014, but despite its young age, it already has a solid reputation. Licensed in Cyprus, this broker is subject to EU regulations and can be considered a trusted broker. Alvexo is also known for offering a variety of training options, including webinars, to help beginners learn to trade.
Many assets are available, such as stocks, indices, currency pairs, or commodities such as gold when it comes to accessing markets and ETFs.
Some ETFs from Alvexo
Alvexo offers about 10 ETFs, including 5 examples below.
- MSCI Korea iShares
- iShares MSCI Brazil
- Russell 2000 iShares
- MG Alternative Harvest ETF
- Financial sector SPDR
Vanguard launched its first ETF in 2001 and Vanguard is best known as a provider of low-cost funds. In 2018, this powerful player pushed the boundaries of individual investors by generating around 90% of all ETFs on the platform with no fees. Investors today can trade all available ETFs for free.
To rank all these ETF options, Vanguard provides selection tools, including the ability to compare ETFs based on factors such as expense ratio, management style (assets or liabilities), average annual returns, and more. You can also have a Vanguard agent negotiate a deal at no extra cost. Once you have chosen your funds, use Vanguard’s planning tools to create a financial plan.
Some ETFs from Vanguard
Vanguard offers 76 ETFs, the top 5 of them are below-
- S&P 500Value ETF
- S&P 500 Growth ETF
- ESG International Stock ETF
- FTSE Emerging Markets ETF
- Total World Stock ETF
7. Charles Schwab
Charles Schwab has long been an advocate for individual investors, and the well-known discount broker has not charged fees on his ETF products for a long time until he cut fees to zero for all ETFs. Trading individual stocks are also free, just like opening and maintaining a broker account at Schwab. In 2021, Schwab took second place among J.D.’s DIY investors. Power over self-managed companies.
Charles Schwab also provides extensive educational resources, including some of the best and easiest-to-use research tools on the market. For example, an ETF selection list describes an investor-friendly fund, taking into account commissions and fees, the fund’s history, and suitability for individual investors.
Some ETFs Offered by Charles Schwab
Charles Schwab ETF Broker offers over 200 ETFs. Five of these are described below as examples.
- Schwab 1000 Index ETF
- Schwab U.S. Dividend ETF
- Xtrackers S&P 500 ESG ETF
- iShares Core S&P Mid-cap ETF
- iShares ESG Aware MSCI USA ETF
IG is one of the UK’s most established online brokers and offers an incredibly wide range of ETFs. This broker gives you access to thousands of ETFs from US, UK, and European investment companies. This means you can choose from multiple ETFs for the same underlying asset.
Another cool thing about IG is that there are three ways to trade ETFs in the UK. You can guess the ETF price by trading the ETF directly, by trading CFDs on the ETF, or by betting on margin. On this platform, CFD trading and margin betting are fees, and ETF direct trading charges fees of up to £3. IG provides traders access to the ProRealTime ETF trading platform. It is advanced software that supports custom indicators, multi-chart dashboards, and backtesting with historical price data.
Some ETFs Offered by IG
IG ETF Broker offers over 58 ETFs. Five of these are described below as examples.
- iShares iBoxx $ Investment Grade ETF
- Vanguard Short-Term Corporate Bond ETF
- iShares 1-5 Year Investment Corporate Bond ETF
- iShares 5-10 Year Investment Grade ETF
- SPDR Portfolio Short Term Corporate Bond ETF
How to choose ETF?
Diversity often makes decision-making difficult and the sheer number of options in the ETF market makes ETF selection difficult. With over 8,000 trackers or ETFs, it’s hard to know where to start. This section provides some tips on how to do this.
Identifying your investment goals will help you choose an ETF, which is essentially a mutual fund that trades like stocks. Do you want to diversify your portfolio, invest in companies with certain characteristics, find cheaper alternatives to investment funds, or simply venture out? Decide in advance that when you want to invest. Most experts suggest not investing the necessary funds for the next five years.
Also read: Best ways to invest money in UK
Know all the risks associated with an ETF broker
Be aware of the risks of ETFs to brokers and what is happening in the market. These include liquidity, the ease of buying and selling at the right time, and the ability to liquidate. The latter risk may arise if the Fund has not contributed sufficient assets to cover its management costs. In this context, it is advisable to review each fund’s assets, their average daily trading volume, and the duration of these trades.
Consider the ETF issuer you want
ETFs and trackers are issued by a handful of brands. Three companies – BlackRock, Vanguard Group, and State Street – oversee 83% of ETF market assets and the world’s top 50 funds, according to Bloomberg data. Other ETF providers like Amundi and Lyxor also play a big role. However, the funds you are looking for are likely to come from one of the top three. These companies have proven their worth.
How to trade ETFs with an online broker?
This section provides a step-by-step guide that shows you how to open a trading account and then buy an ETF from an eToro broker. We will explain this procedure in detail below:
Step 1: Register the account
The first step in opening an account is to fill out a simple registration form. Traders are needed to provide their first name, email address, and phone number. You will also be asked to select a username and password that will be used to identify you in the eToro trading interface.
After completing these steps, you will have access to the eToro platform. You will then be credited with a demo trading account with virtual currency, where you can learn how to use the platform and practice trading without the risk of loss.
Step 2: Verify your account
The next step in opening an account is verified. First, you will be asked a series of questions about finances, market experience, and investment expectations. This is a promise for all regulated brokers who need to ensure that their clients fully understand the risks of their trades. For verification, you are needed to provide your government identity.
Step 3: Deposit the funds
To invest in ETFs you need to make your first deposit and fund your account with real money. To do this, you need to click on “Deposit” in the lower-left corner of the eToro platform. On the next page, you will need to specify the details provided along with the payment method you want to use and enter the amount to be deposited into your account.
Step 4: Find and Buy ETFs
Once you know the ETF you are looking for, you can access the list by entering its name in the search box at the top of the platform. To explore eToro’s ETF offerings, you must access a list of 264 available ETFs by clicking on “ETFs” at the top of the platform. You can browse the list and click on each ETF to find its file and details.
Why invest in ETFs?
There are so many reasons to invest in ETFs-
Because ETFs are traded like stocks, you can buy a diversified portfolio with the same low fees as stocks. Also, ETF broker eToro does not charge a fee to buy or sell the tracker. ETFs typically have a lower expense ratio (management fee) than mutual funds.
ETFs can be very specific or classified into specific economic sectors. This allows investors to occupy various positions in a small segment of the field they wish to participate in.
Different ways to deal with any strategy
Thousands of ETFs are traded on stock markets around the world today. Diversity is great and includes all major indices, sectors, industries, sizes (i.e. large caps, mid-caps, small caps, microcaps, etc.), strategies (growth, value, etc.), international (i.e. industrial, emerging, frontier markets), specific countries, Even exotic ETFs (commodities, short or short funds, leveraged funds).
Also read: Best growth stocks UK for 2022
ETF brokers allow small purchases
Because ETFs are traded like stocks, position size is advantageous. You can buy a small position (without a minimum investment) to increase or decrease your position in a particular ETF.
ETFs and Liquidity
Because ETFs and trackers are traded on exchanges, unlike mutual funds, they can be traded in real-time at any time, not just at the end of the day. This can be a huge advantage when volatility is high.
Tips to consider while choosing an ETF broker
Check out the number of trackers you can use with ETF brokers
ETF brokers do not offer all ETFs available in the market. They usually offer dozens or hundreds of ETFs available. Therefore, the number of available trackers is a key factor when choosing an ETF broker. The greater the number of ETFs offered, the more options you have. If you’re already thinking of an investment idea, you should check if the ETF broker you’re interested in offers the ETF or equivalent you’re looking for.
Be aware of the security and regulations of ETF brokers
Safety is also an important criterion when choosing an ETF broker. Choose a broker that is regulated in Europe. This is especially the case with eToro. The age of the broker is also interesting because it gives an idea of its reliability.
Comparison of Brokerage Fees for Buying ETFs
There are two types of fees for ETFs and trackers.
- ETF Brokerage Fee
- ETF management fee
So, choose an ETF broker with low brokerage fees. It’s a hard place to do better than eToro, which doesn’t charge a fee to buy or sell ETFs.
ETF Broker’s Reputation Analysis
Also important is the broker’s reputation, which can be easily found with a simple Google search. It’s a simple way to check the satisfaction of existing customers. If the existing traders are satisfied then you will also get a positive response.
Broker and his educational offer
Finally, if you are a beginner, it is important to choose an ETF broker who will help you with your trading training. This can be done, for example, in the form of a video or webinar. It is important to provide your broker with the resources so that you have every opportunity to make a good investment.
ETF Broker Trading Platform Study
Trading platforms that place orders and track ETF investments are also very important criteria. The platform should be easy to use to avoid the risk of errors. You should also have all the technical analysis capabilities to help you forecast, analyze trends, and set your goals right.
Conclusion: Which ETF Broker Should You Choose in 2022?
ETFs have many advantages for investors and traders. This makes it easy and affordable to follow advanced diversification strategies. ETFs and trackers also provide access to markets that are normally difficult to access. It is also the best way to invest in the stock market while limiting your risk.
To benefit from it, you must first choose a quality ETF broker. This article introduces five of them. However, it is particularly noteworthy. This is eToro. Its user-friendly platform and wide selection of over 264 ETFs make it an ideal ETF broker for investors interested in this market with many qualities.
Frequently Asked Questions
What are the main advantages of an ETF broker?
The main advantage of ETF brokers and ETFs is in fact diversification. An ETF is a basket of stocks. With a single purchase, you can easily invest in many stocks at the same time.
Which is the best ETF broker?
As we have seen in this guide, eToro is the most powerful ETF broker. Of particular note is the wide selection of ETFs, an easy-to-learn platform. Most importantly, the broker does not charge a fee for buying an ETF.
Are ETF brokers better for investing or trading?
Long-term investors will appreciate the diversification of ETFs. However, since ETFs are traded in real-time, they are also suitable for day traders.
What criteria should I consider when choosing an ETF broker?
The size of the ETF supply available is an essential criterion, but you should first make sure you are trading ETFs with a regulated broker. This is especially the case with eToro and other ETF brokers mentioned in this guide.
Are ETF brokers right for beginners?
ETF brokers and ETFs are suitable for beginners because they are less risky investments than buying stocks with diversification. However, as with all investments, investing well in ETFs requires minimal training.