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An Exchange Traded Fund (or ETF) is an investment vehicle traded on stock exchanges, much like stocks or bonds. It holds assets such as stocks or bonds and trades at approximately the same price as the net asset value of its underlying assets over the course of the trading day.

However, unlike an equity, where structures are broadly similar, ETFs do not share a common structure- some are simple trackers, whilst, for example, others use derivatives to 'short' the market or to provide leverage. These latter structures are therefore of higher risk than a straightforward 'index tracker' ETF but, as with an equity, all ETFs are ultimately reliant on the underlying financial strength of the issuer and, where derivatives are used, to the provider (known as the 'counterparty') of those derivative products too.

Just as with any other asset class, the value of ETFs can go down as well as up and you may get back less than you originally invested. ETFs that use derivative structures, and in particular 'short' and 'leveraged' ETFs, are not for everyone: they are better suited to very short-term trading rather than longer-term investment, are more complex in structure and carry a much increased level of risk.

Alongside the tradability feature of an equity or closed-end fund (which trade continuously throughout the trading day), an ETF also combines the diversification and valuation features of a mutual fund or unit investment trust. And because of their typically lower costs and ease of trading, they are often considered as an alternative to the more traditional Funds (Unit Trusts and OEICs).

ETFs have been available in the US since 1993 and in Europe since 1999 and whilst originally devised as index funds, tracking the performance of the FTSE or Dow for example, they have now extended their scope such that many different structures - 'short', 'leveraged' 'actively managed' fundaments' ... so for each particular ETF in which you are planning to invest, it is important you are clear how the works. You'll find useful links to various issuers' websites on the ETF Literature tab.

Be sure to check the Distributor status of any ETFs you plan to purchase: Capital gains in Funds which do NOT have Distributor Status will be treated as income by UK tax authorities and could hence be subject to a higher rate of tax than might apply if they were assessed for Capital Gain Tax purposes.

Our ETF platform enables you to trade ETFs from a wide range of issuers: you'll find details on our ETF Literature page along with useful publications and information from those issuers.

From time to time we'll include interesting items of news from the ETF market on our ETF News page, and on the ETF List you'll find details of ETFs, including 'at least 15 minute delayed' prices (do bear in mind therefore that the price you actually trade at can be different); change since the last market close, and other useful summary information. Click on the name to see more detailed information.

Buying and selling ETFs costs the same as trading other equities - you'll find dealing charges shown on our Price List. A range of ETFs are also available within our monthly Regular Investment Service.

Before buying an ETF, however, you should read the Prospectus (available on the issuers' websites) and be sure you understand how it is structured and its risks.