Build diversified portfolios with ETFs

The benefits of ETFs are:

• ‍Diversification: Traders can access a broad range of assets and potentially reduce their risks within a singular instrument.
• ‍Transparency: ETFs are required to disclose their holdings on a regular basis.
• ‍Cost-effective: ETFs have typically lower expense ratios compared to mutual funds or owning each asset within the ETF individually.
• ‍Liquidity: ETFs are generally highly liquid, with readily available buyers and sellers.

There are different types of ETFs such as:

• ‍Broad market ETFs: These ETFs aim to replicate the performance of an entire market or a specific index, such as the S&P 500 or the FTSE 100.
• ‍Sector ETFs: These ETFs focus on specific sectors of the economy, such as technology, healthcare, or energy.
• ‍Bond ETFs: Bond ETFs invest in fixed-income securities, including government bonds, corporate bonds, and municipal bonds.
• ‍Commodity ETFs: These ETFs provide exposure to commodities like gold, oil, natural gas, or agricultural products.
• ‍International ETFs: International ETFs focus on specific countries or regions, providing traders with exposure to international markets.
• ‍Smart Beta ETFs: Smart Beta ETFs use alternative weighting methodologies or factors to construct the portfolio, aiming to outperform traditional market-cap-weighted indices.
• ‍Currency ETFs: Currency ETFs track the performance of a specific currency or a basket of currencies.
• ‍Specialty ETFs: Specialty ETFs cover niche areas such as real estate, emerging markets, alternative energy, or specific investment strategies.

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For more information on the types of ETFs offered by Deriv, visit our trading specs page.

The main costs when trading CFDs on ETFs are:

• ‍Spread: This is the difference between the buy and sell price quoted by the broker. It represents the cost of placing a trade.
• ‍Overnight financing: To keep a position open overnight, a financing charge is applied based on the benchmark rates plus a markup (swap-free accounts do not have this charge).
• ‍Commissions: Some brokers may charge per trade commissions. Deriv offers commission-free CFD trading.
• ‍Currency conversion: Converting currencies when trading in foreign markets, depending on the base currency of your account, may incur fees and have an element of forex risk.

CFD accounts are derivative accounts used for speculating on price movements and do not receive cash dividends. Instead, "dividend adjustments" are made by Deriv to account for the impact of dividend payments. These adjustments are made on the ex-date for CFD accounts, ensuring that no profit or loss is made from these scheduled public events.

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For long positions, if a dividend is issued, the profit/loss would decrease as funds leave the company, reducing its value. However, the account is credited with the amount by which the profit/loss decreased to neutralise any significant impact and maintain fair value.

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On the other hand, for short positions, if a dividend is issued, the profit/loss would increase as funds are distributed to shareholders. To offset this impact and maintain fair value, the account is debited with the amount by which profit/loss increased.