How to buy Exchange Traded Funds

ETF Pricing

ETFs are liquid investments, which closely match the Net Asset Value (NAV) of the underlying holdings. High liquidity is important as it means that investors will be able to sell their shares at any point during normal market hours. It is also important that the market price closely reflect the NAV of the underlying holdings so that the true value of the holding can be realised when selling. The methods used to create new shares and redeem existing shares by ETF providers generally prevents ETF shares from trading at a premium or discount for a sustained period of time.

Where ETFs trade during periods in which the market that they track is closed, the market price may stray from the NAV in a similar way to a futures market where investors predict the forthcoming day's trading. An example of where this could occur is a European quoted ETF tracking an Asian index.

Dividends - Any relevant dividends are accumulated within the fund and then distributed to investors at regular intervals. ETF management fees are usually deducted directly from the dividend yield.

All ETFs and ETCs are designed to reflect the price of an underlying index/ stock or commodity. However, at times other factors might influence the price. For example doubts about the financial strength of any counterparty, or problems over liquidity. These situations are unusual but did affect a number of ETCs which were backed by AIG in the week beginning 16th September 2008. The providers’ websites and prospectuses will give more details.

How to buy ETFs

ETFs can be purchased within the HL Vantage Service at the standard stock broking rates. The majority can also be held within the HL Vantage ISA and SIPP.

HLVantage Share Account Telephone share dealing (per deal):

• Minimum £15
• 1% of consideration
• Maximum £50

HL Vantage ISA and SIPP Telephone and postal share dealing (per deal).

• Minimum £10
• 1% of consideration
• Maximum £50

Please note that when holding ETFs within the HL Vantage ISA or SIPP there will be an additional annual management charge of 0.5%+VAT to a maximum of £200+VAT.

If you subscribe to the active trader option (£12.50 per quarter) on the HL Vantage Share Account you will be charged a flat fee of £9.95 per online deal within the Share Account only.

Certificated share dealing in ETFs is also available at the standard rates.