Are ETFs A Good Investment Option | will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by will always be from Be Scamsmart.

ARCHIVED ARTICLE This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Derin Clark

Derin Clark

Online Reporter
Published: 28/04/2021

When looking at which investments to choose, many DIY investors will usually opt for more familiar types of investments such as stocks or mutual funds, but for some investors, it may be worthwhile considering less familiar types of investments. One type of investment that investors may want to consider is exchange-traded funds (ETFs).

Here we take a look at what ETFs are and whether they are a good investment for DIY investors.

The information provided in this article should not be considered as advice, instead investors should speak to a qualified independent financial adviser before making an investment. It is also important to note that investing in an ETF can result in investors not making any returns on their investment, and in some case, may result in them losing some or all their initial capital as well.

What are ETFs?

As with mutual funds, an ETF allows investors to buy and sell a basket of assets without having to buy all the components individually, but unlike a mutual fund, an ETF can be bought and sold throughout the trading day.

When explaining what an EFT is, Laith Khalaf, financial analyst at AJ Bell described it as very similar to a tracker fund. Khalaf explained: “Plain vanilla ETFs are very similar to tracker funds, in that they follow the performance of a broad market index, and do so at extremely low cost. They can also be held in ISAs and SIPPs just like traditional funds, and so have their gains and income sheltered from tax. Probably the most attractive edge that ETFs offer is they can be traded throughout the day, giving investors greater scope to buy on dips. By contrast, tracker funds work on a forward pricing basis, so you never know exactly what price you will pay. Over the long term, this isn’t likely to make a big difference, but some investors like to invest part of their portfolio more tactically, and some simply want to know they can buy and sell immediately, as they can with listed shares.

“ETFs can also be useful to give investors more specialised exposure to particular themes in the market, which active and index funds don’t tend to cover in such a focused way. For instance, the iShares Automation and Robotics ETF tracks an index of companies involved in the robotics and automation industry.”

Are ETFs a good investment?

The benefit of ETFs allowing investors to buy and sell throughout the trading day, combined with the benefits of a fund makes ETF potentially a good investment choice for some investors, but it is important to remember that all investments carry a risk.

Khalaf added: “While there are definitely some weird and wacky options in the ETF space, the most popular options with DIY investors show they are predominantly using ETFs to gain exposure to major markets, just as they would an index tracker fund. As ETFs rise in profile, more investors will likely join the growing throng of converts.”

What are the risks of ETFs?

Although investing in an ETF can be a good way for experienced DIY investors to benefit from investing in major markets, this type of investment is not for everyone. Possible risks include the costs involved, fluctuations in price and a potential lack of liquidity when an investor wants to sell. All of these could result in a loss of capital. As such, investors should carefully consider all options and, ideally, get advice from an independent financial adviser before making investments.

How to invest in ETFs

Many investment platforms, such as interactive investor, offer investors the option of investing in ETF, which is often the easiest way for DIY investors to invest. 

Free review of your savings and investments

Visitors to can access a free one-hour consultation to review their savings and investments from award winning, independent advisers Kellands Hale. Their experts can help savers to assess their investment options and to find the best possible returns.

Find out more

Our guide on investment platforms provides more information about investing this way, as well as how to get started.


Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

stocks graph on screen

Cookies will, like most other websites, place cookies onto your device. This includes tracking cookies.

I accept. Read our Cookie Policy