Whats the difference between buying Exchange Traded Funds units and just buying shares?
EFT units are based on a ‘basket’ of shares, and priced according to the value of the whole group of shares. In that sense, they’re a lot less volatile than many shares, for market trading purposes. Share trading relates only to buying and selling shares of individual listed companies. The share price of a company is purely subjective, and relates only to that company. Think of it as a like price averaging exercise, although in the case of EFTs income also plays a role in unit pricing. EFT units are traded on a sector basis. One of the shares held in the group of shares may go down, but the others remain relatively stable, and underpin an average unit price. The fall in the price of a stock doesn’t have the same impact on an EFT investor. The income from the group of shares provides an additional buffer in values of the EFT units.
