{"id":175895,"date":"2020-09-30T15:37:00","date_gmt":"2020-09-30T19:37:00","guid":{"rendered":"https:\/\/ibkrcampus.com\/trading-lessons\/benefits-risks-of-etps\/"},"modified":"2026-06-23T13:02:07","modified_gmt":"2026-06-23T17:02:07","slug":"benefits-risks-of-etps","status":"publish","type":"trading-lessons","link":"https:\/\/www.interactivebrokers.com\/campus\/trading-lessons\/benefits-risks-of-etps\/","title":{"rendered":"Benefits &#038; Risks of ETPs"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\"><strong>New to Interactive Brokers?<\/strong><\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button has-custom-width wp-block-button__width-50\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/ndcdyn.interactivebrokers.com\/mkt\/?src=taETPIntroAcc&amp;url=%2FUniversal%2FApplication\" target=\"_blank\" rel=\"noreferrer noopener\">Open Account<\/a><\/div>\n<\/div>\n\n\n<p class=\"wp-block-paragraph\"><\/p>\n\n\n<h3>Benefits &amp; Risks of ETPs<\/h3>\nBefore deciding if exchange-traded products (ETPs) are the right type of investment for your portfolio, you should explore the facts.\n<h4>Benefits<\/h4>\nSome of the benefits of using ETPs include:\n<ul>\n \t<li>Flexibility<\/li>\n<\/ul>\nETPs are flexible. They can provide access to an entire index, or alternative asset classes, with a single trade.\n<ul>\n \t<li>Accessibility<\/li>\n<\/ul>\nETPs are accessible and can be bought and sold whenever the stock exchange is open.\n<ul>\n \t<li>Affordability<\/li>\n<\/ul>\nThe relatively low costs associated with managing ETPs, compared to other investments, make them a cost-effective way for investors to gain access to a wide range of asset classes.\n<ul>\n \t<li>Transparency<\/li>\n<\/ul>\nETPs are transparent. ETP constituents are published on a daily basis, making it easier for investors to see exactly what they own.\n<ul>\n \t<li>Simplicity<\/li>\n<\/ul>\nETPs are simple. They are listed on an exchange and traded in a similar way as shares.\n<h4>Risks<\/h4>\nBut as with all investments, there are risks. It is important to distinguish what risks an ETP is subject to before making an investment.\n<h5>Market Risk<\/h5>\nThe objective of ETPs is to replicate the performance of an underlying benchmark minus fees. They are therefore exposed to market risks driven by price movements in the underlying.\n<ul>\n \t<li>Costs<\/li>\n<\/ul>\nAll ETPs incur costs, whether ongoing charges \u2013 a measure of recurring costs in an ETP, which represent the cost of managing a product, also referred to as the Total Expense Ratio.\n\nPortfolio transaction costs, which include variable fees associated with the buying and selling of securities in an ETP by the ETP issuer. And trading and post-trading costs incurred by the end investor when trading an ETP.\n<ul>\n \t<li>Tracking Difference<\/li>\n<\/ul>\nThe structure and cost of an ETP means it may not track its underlying exactly. This is referred to as tracking difference.\n<ul>\n \t<li>Tax Considerations<\/li>\n<\/ul>\nAnd as with all investments, ETPs will usually incur some form of taxation. Investors should therefore consider obtaining independent tax advice before investing in ETPs.\n<ul>\n \t<li>FX Risk<\/li>\n<\/ul>\nPlus, any investment based in a non-local currency will be affected by exchange rate fluctuations. Currency hedged ETPs can mitigate this risk, providing exposure to the underlying without an additional currency risk.\n\nFor more information, please visit:\n<ul>\n \t<li><a href=\"https:\/\/www.wisdomtree.eu\/en-gb\/resource-library\/etpedia\" target=\"_blank\" rel=\"noopener\">WisdomTree \u2013 ETPedia (Educational Guide to ETPs)<\/a><\/li>\n<\/ul>","protected":false},"excerpt":{"rendered":"<p>This lesson highlights some of the opportunities and risks presented by ETPs.<\/p>\n","protected":false},"author":850,"featured_media":221437,"parent":0,"comment_status":"open","ping_status":"open","template":"","meta":{"_acf_changed":false,"footnotes":""},"contributors-categories":[13714],"traders-academy":[13125,13128,13132],"class_list":["post-175895","trading-lessons","type-trading-lessons","status-publish","has-post-thumbnail","contributors-categories-wisdomtree-europe","traders-academy-beginner-trading","traders-academy-level","traders-academy-trading-lesson"],"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v28.1) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Archives | Traders&#039; Academy | IBKR Campus<\/title>\n<meta name=\"description\" content=\"This lesson highlights some of the opportunities and risks presented by ETPs.\" \/>\n<meta name=\"robots\" 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