An exchange-traded fund (ETF) is a financial instrument comprised of several assets grouped together to serve as one tradable asset. Each fund follows a certain market strategy or index and is designed to either suit the hedging needs of a specific financial institution, or to be a low-risk option for investors. ETFs are created by financial bodies using a team of experts who tailor each fund to meet its specific goal. The assets within the fund are owned by its creators, and just like stocks, dividends can be distributed to investors from time to time. ETFs are usually considered to be long-term investment tools, as they are geared towards low-risk, and are designed to yield steady profits over time.
Investing in ETFs on eToro by opening a “buy” (long), non-leveraged position means you are investing in the underlying asset, and the ETF is purchased and held in your name*. However, eToro also offers additional functions using CFD trading. With CFDs, you can open “sell” (short) positions, use leverage, and buy fractional shares. For example, on eToro you are able to invest as little as $200 in an ETF that actually costs $1,000.
*All leveraged ETF positions in the UK, under FCA regulation, and all positions in Australia, under ASIC regulation, are executed as CFDs.