There have definitely been some subtle changes recently in the ways investors are choosing to put their money to work. One of the most notable moves is the transition into broader ETF investments and away from some growth-centric stocks and shares.
Whether you’re deep into your investing journey or just starting out, it’s always good to have a solid understanding of all the investments available to you. So, I’m going to explain some key things you need to understand about investing in funds and reveal the 10 most popular ETF investments from the Freetrade platform in 2021.
[top_pitch]
What on earth is an ETF?
An ETF – or exchange-traded fund – is an investment that tracks certain markets, assets or commodities that can usually be bought or sold on multiple platforms and stock exchanges.
So, it’s a single investment that you purchase in the same way as a stock or a share. But it often contains multiple investments, which is why ETFs are sometimes called ‘baskets’. This means a portion of your hard-earned money will go to different entities within the fund.
You may have heard people talking about index funds, and an ETF is a common way for you to get involved in this method of investing. It’s an accessible way for you to become an owner of all the businesses in a popular index such as the FTSE 100. An ETF also tends to be a cheap way of investing, making it a good pick if you enjoy a bargain!
What were the 10 most popular ETFs in 2021?
Now that you’ve got a solid foundation in this type of investment fund, let’s take a look at the 10 most popular examples on Freetrade in 2021.
| Position | ETF Name |
| 1 | iShares S&P Global Clean Energy Dist. (INRG) |
| 2 | iShares Core FTSE 100 Dist. (ISF) |
| 3 | Vanguard S&P 500 Dist. (VUSA) |
| 4 | Vanguard S&P 500 Acc. (VUAG) |
| 5 | iShares UK Dividend Dist. (IUKD) |
| 6 | iShares Core S&P 500 Dist. (IDUS) |
| 7 | Vanguard FTSE All World Dist. (VWRL) |
| 8 | iShares S&P 500 Hedged Dist. (IGUS) |
| 9 | Invesco Nasdaq 100 Dist. (EQQQ) |
| 10 | iShares Core MSCI World Hedged Dist. (IWDG) |
Why is there only a handful of providers on this list?
Vanguard and BlackRock (the owner of iShares) are two of the biggest asset managers in the world. This means their popularity amongst investors leads to them managing a heck of a lot of money.
The size of these providers can lead to lower expense ratios (the cost of owning the ETF). Because many of these funds cover similar markets or indices, going for the cheapest option is usually your best bet. There’s no point paying more for the same investment.
You may also be curious about the ‘Dist.’ and ‘Acc.’ labels after each fund. This simply refers to these two methods:
- Distribution – Funds with ‘Dist.’ in the title means that any income earned from dividends is paid out to you. You can then decide whether to keep those payments or reinvest them.
- Accumulation – Any investment fund with ‘Acc.’ in the name means that income is automatically reinvested and rolled back into the fund. This can be a good option if you’re looking to build and accumulate wealth over time using compound interest.
[middle_pitch]
What’s a good strategy for ETF investing?
Depending on your investing strategy, ETFs can play a useful role in your portfolio. Although using a singular fund does give you some diversification, using a few different funds is a better way to cover different markets.
You could also use a fund for part of your portfolio and then buy individual stocks, shares and other assets to build a uniquely diversified portfolio in a style that you’re happy with.
ETFs are a great way to access lots of investments with just a single purchase, but it’s important to remember that there are still passive investing risks.
How can you invest in an ETF?
Once you have an idea about what kind of role you want an ETF to play in your strategy, the next step is to research which funds you’d like to invest in.
You’ll then need a share dealing account that gives you access to all the funds you want. Not every platform will have every fund available.
Most ETF investments can be held within a stocks and shares ISA, so make sure you take advantage of those tax benefits if you can. If you need some help going over some more investing basics, take a look at our complete guide to share dealing for a helping hand.
