Exchange Traded Funds (ETF’s) are essentially shares that are traded on a stock exchange. The assets of these funds reflect the price movement of an index, sector or commodity like the FTSE 100. ETF’s can replicate a number of indices such as shares, property, private equity, energy and water.

Within the United Kingdom ETF’s will be traded on the London Stock Exchange and in the European markets there are also numerous issuers of ETF’s.

Index tracker funds reflect movements in stock market indices and were once considered to be superior. However, in more recent years ETF’s have provided increased competition.

Outside of a tax free wrapper you will find that capital gains from both ETF’s and index tracking funds will be taxed at 18 per cent but it is important to remember that SIPP’s provide a tax free wrapper.

When considering investment it is important that you seek bespoke independent advice from a reputable company due to the complexities that are involved in this type of investment.