Understanding ETFs and Trackers#

ETFs (Exchange-Traded Funds), also called trackers, are exchange-listed investment funds that replicate the performance of an index. Since their creation in 1993, they have transformed investing by making it accessible, diversified, and inexpensive.

How Does an ETF Work?#

An ETF holds a basket of assets (shares, bonds, commodities) that replicates a benchmark index. An S&P 500 ETF, for example, holds all 500 companies in the index in the same proportions. You buy units of the ETF like an ordinary share, on the exchange, at any point during the day.

Types of ETF#

• Index ETFs: replicate an index (S&P 500, CAC 40, MSCI World)
• Sector ETFs: concentrated on one sector (technology, healthcare, energy)
• Thematic ETFs: AI, cybersecurity, water, green hydrogen
• Bond ETFs: exposure to government or corporate bonds
• Commodity ETFs: gold, silver, oil via futures contracts
• Crypto ETFs: Bitcoin, Ethereum (approved by the SEC in 2024)

Essential ETFs for Getting Started#

For a beginner investor in Europe, these are the most popular ETFs: iShares Core MSCI World (IWDA) for global exposure, Amundi CAC 40 (C40) for France, Vanguard S&P 500 (VUSA) for the United States, and iShares Core Euro Government Bond for fixed income.