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FinTech makes exchange traded funds even more attractive
FinTech is increasingly having a positive impact on the cost and availability of financial products as exemplified by a recent development in the market for exchange traded funds (ETFs).
Investment in ETFs has shown explosive growth in recent years and £2trillion is now invested in such funds. ETFs track, for example, an index (e.g. FTSE100), a commodity or other assets.
ETFs have a number of potential advantages over tracker funds, investment trusts and open-ended investment companies including liquidity (ETFs can be traded at any time during a trading day) and low costs: the total expense ratio of some ETFs is now as low as 0.07%. Transaction fees/commissions also need to be paid when trading ETFs and in a recent development, Degiro (a Dutch broker which launched in the UK in 2015) has introduced partially commission-free trading on more than 700 ETFs.
As part of the offer, an investor will be able to trade ETFs commission-free for any transaction above 1,000 Euro after their first trade in a month. Degiro claims that it is its client-first FinTech approach that enables it to be so competitive in the market.
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