Investing in Other Stock Market Instruments

Buying shares or funds aren’t the only way of getting exposure to the stock market. Over the past few years a whole host of different stock market related investments have been introduced that give investors access to a completely different way of making money.

Some of these investments, such as Exchange Traded Funds provide cheap ways for novice investors to get access to the moves in a specific stock market index or sector. Others, such as spread betting and Contracts for Difference, can give you the ability to make money when share prices fall and, perhaps, double up your exposure to the gain in a particular share’s value.

This does, however, make some of these investments more suitable for experienced investors so you should tread carefully and make sure you understand the risks you are taking before you invest.

Exchange Traded Funds

Exchange Traded Funds (ETFs) work like index tracker funds, giving you access to the performance of specific indices such as the KSE 100 or sectors, such as technology. But unlike index tracker funds, ETFs are set up as companies and rather than using computer modeling to track an index, they build portfolios of real shares.

While there should be very little difference between the performance of index tracker funds and ETFs, being set up as companies gives ETFs a real advantage – they can be traded throughout the day like ordinary shares. Index trackers can only be bought and sold at a price set at the end of the day.

The annual fees on ETFs are similar to tracker funds, but you will also have to pay stockbrokers’ commission.