A basket of stocks with one click

INVESTMENT funds that track benchmark indices and trade on an exchange just like stocks continue to shape the financial services arena.

Exchange-traded funds (ETFs) are such investable funds.

Many ETFs simply invest in the baskets of stocks that make up benchmark indices.

Investors then hold units in the combined value of those stocks and can trade their units on an intra-day basis.

ETFs can also track indices that follow other asset classes, such as bonds, commodities or money market products.

This underlying element of diversification means that ETFs are also referred to as portfolio products.

The size of ETFs, in terms of combined asset values, is now on a par with hedge funds.

ETF research and consultancy firm ETFGI recently noted that assets in the global ETF industry reached a record of US$2.926 trillion at the end of March, while assets in the global hedge fund industry, according to HFR Research, reached a record U…