Questions of the Week – ETF basics and Asian access

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Question: Would you mind explaining a little about exchange traded funds (ETFs). I notice they’re not cheap to invest in. Do they pay a dividend or do they simply represent (hopefully) a gain in the value of a stock?

Answer (By Paul Rickard): Most ETFs passively track an index, such as the S&P/ASX 200. Because the ETF invests in the underlying shares that make up the index, it receives dividends and then passes on the income as a distribution to its unit holders. Typically, distributions from the ETF are paid quarterly.

Most of the ETF providers, such as iShares or Vanguard, have detailed information explaining how ETFs operate. See www.ishares.com.au or www.vanguardinvestments.com.au

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