What is an ETF and how do ETFs work?

ETFs explained - How to exchange-traded funds work
In this guide we’ll cover everything you need to know about ETF investing: learn what an ETF is, how ETFs work and how they could fit into an investment portfolio. 

Before diving in, it’s important to understand that any tax treatment depends on your individual circumstances and may be subject to change in future. You also need to be comfortable with the fact that the value of your investments can fall as well as rise, so you might get back less than you originally invested.

ETF definition

ETFs — or exchange-traded funds — are funds that trade on the stock market. 

Most ETFs track the performance of an index. That could be a stock market index like the S&P 500 or a sector index like the S&P Global Clean Energy Index.

What ETF stands for
What ETF stands for


How do ETFs work?

In most cases, ETF managers will buy a collection of stocks or other assets which broadly mimics a market index like the S&P 500 or a sector such as retail, and performs in line with it. 

As investors, if you like the sound of this objective, you buy shares in this fund and this way you’ll have exposure to all the companies within the fund, without having to buy and own them individually.  

How ETFs work


Actively managed ETFs

Most ETF managers are not attempting to pick winning stocks, and this is where the description of passive investing comes in. It’s passive because fund managers are simply matching their fund to the index they want to track and letting things play out. 

This is opposed to ‘active’ management, where a fund manager will ‘actively’ look for assets they think are going to outperform the market and invest accordingly.

While there are exceptions and some ETFs are actively managed, for now, an ETF is most likely a passively managed, index-tracking fund.

📓 ETF key takeaways 
  • With ETFs you invest in a ready-made basket of stocks or other assets in one go. 
  • ETFs generally track the performance of a market index like the S&P 500 or sector indices such as renewable energy or financial services.   
  • ETFs can be a low cost way to diversify your portfolio.

Pros and cons of ETFs


ETF Advantages ETF Disadvantages
Simple
Invest in a ready-made basket of stocks or other assets. This way, you don’t have to choose or buy each stock individually.
Market returns
ETFs track an index, which means your investment will generally rise and fall in line with the market it’s invested in. By design, it will never aim to beat the index.
Portfolio diversification
Spread your money across different companies, sectors and even different assets like bonds or commodities. All this should help you to reduce your stock-specific risk.
Diversification not guaranteed
Sector-specific ETFs might actually concentrate your risk, as any external effect on that sector could move the price of all stocks in an ETF.
Low costs
Index ETFs are generally less expensive than actively managed funds, as they are cheaper to run. An ETF should also cost less than buying all the individual shares.
Ongoing charges
ETFs still have ongoing fees to cover the annual costs of running the fund. Look out for the TER, you’ll find it in the KID (Key Information Document) of each fund. Active ETFs in specific sectors can end up charging similar fees to other active funds.
Tax-efficient
Some ETFs are exempt from the UK’s 0.50% stamp duty. Hold your ETFs in an ISA or SIPP account and you can access additional tax efficiencies.
Liquidity risk
Liquidity risk is the risk that an asset may be difficult to sell quickly or to sell at a reasonable price. Typically this risk reduces the more highly traded the security is. Certain ETFs can suffer lower liquidity at times.

Please remember any tax treatment depends on your individual circumstances and may be subject to change in future.

Pros and cons of exchange-traded funds


Why are ETFs popular?

ETFs’ popularity continues to grow beyond US shores to the rest of the world. In fact, money flowing into ETFs so far this year has already surged past 2020’s global total. 

The driver? A continued search for lower investing costs. 

According to ETF data provider ETFGI by the end of August net flows into ETFs reached $834.2bn, shooting beyond last year’s annual inflows of $762.8bn. 

These inflows, plus the global recovery, have helped ETF assets reach $9.7 trillion, double what they were in 2018.


Different types of ETFs

Most people will use ETFs to track a stock index and ride the wave that the market returns. 

But there are several different types of ETFs and each one provides investors with different benefits.

The thing to remember here is that, even though we generally think of an index as referring specifically to stocks, there are actually indices covering multiple asset types, including everything from oil to the bond markets.

ETF types

🏛 Stock index ETFs

Stock ETFs tend to be the most popular option when it comes to ETFs and that’s as true for beginner inve3stors as it is for the pros.

Stock ETFs are generally a way for you to get exposure to a large set of stocks via one investment. 

The most popular stock ETFs track big name indices but others will track specific sectors, countries or regions. For example, the L&G Battery Value Chain ETF tracks an index that contains battery makers and companies that mine for minerals used to make batteries. 


Most popular stock ETF 

There’s been a changing of the guard at the top of the Freetrade stock ETF rankings since last year. It’s been a case of UK out and US in. 

A number of S&P 500 ETFs have jumped up the ranks, including the Vanguard S&P 500 ETF, which has replaced the iShares Core FTSE 100 UCITS ETF as the most bought ETF. 

Thanks to its large tech weighting the S&P 500 has recovered remarkably quickly from the lows of the COVID-19 outbreak in March last year. In fact, it has managed to go onto all-time highs since those market lows. 

Things have been less rosy for the UK main market though, which lacks the tech giants that have helped boost US markets this year. The UK also continues to be weighed down by investor uncertainty over Brexit. 

🏛 Sector ETFs

ETFs are an easy way to invest in a particular sector without having to choose an individual stock to invest in. With a sector ETF you’ll likely get access to all main players in that sector. 

The variety of different sectors is huge, ranging from robotics to clean water. The chances are if you have a sector in mind there will be an ETF for it. 

Other sector ETFs track AI businesses, real estate firms or even esports and gaming. 


Most popular sector ETF 

The rise in popularity of the iShares Global Clean Energy UCITS ETF has been another interesting story over the past year. 

It tracks the S&P Global Clean Energy Index, which is comprised of firms from around the world that are active in the renewable energy space.

Climate change came to the top of the world’s priority list in 2020 and that’s continued into 2021. 

As more companies and governments have to walk the walk when it comes to net zero and beyond, the renewable energy landscape will have to deliver. It will be an interesting story to see unfold. 


🏛 Thematic ETFs

Thematic ETFs are a bit like sector ETFs but have a slightly more targeted focus. Thematic ETFs aim to capture the next big long-term growth trend. This could be how the world adapts to ageing populations or climate change, or even how the world’s spending and behaviour patterns are changing. 

The key difference between a sector ETF and a thematic ETF is that a theme could see you invest in lots of different sectors, as long as the stock included is likely to benefit in some way from the long-term theme evolving. 

Take ageing populations as an example. While this likely includes healthcare and pharmaceutical companies. A thematic ETF may also include financial companies helping people fund retirement. 


Most popular thematic ETFs 

One of the most popular thematic ETFs with Freetrade customers this year so far has been the iShares Automation & Robotics ETF. 

It invests in companies across the globe involved in the development and use of automation and robotic technology. 

Companies within this fund range from communication companies to 3D design automation. 


🏛 International ETFs

One of the big benefits of investing in ETFs is the ability to access foreign markets comparatively cheaply.

This is possible because there are lots of ETFs that will track the performance of companies in specific countries or regions.

For example, ETFs that invest in East Asian countries have become extremely popular in recent years, as investors look to capture the growth that has taken place in China but also in much of South East Asia.


Most popular international ETF 

With funds like the Vanguard FTSE All-World ETF and Vanguard FTSE Emerging Markets ETF rising up the ranks over the year so far, it’s broad international exposure that seems to be more in favour in 2021. 

And given the past year we’ve had, perhaps this is not too surprising. 

While COVID-19 has been felt across the world, the scale and timing of the impact in each country has been different. And it’s the same story with the global recovery. 


🏛 Dividend ETFs

Do ETFs pay dividends? Yes, some do. 

If you’d like an ETF that pays out dividends to you, lookout for a ‘Dist’ (distributing) or ‘INC’ (income) version of the ETF. You can fund this information at the end of the fund’s legal name. Any income you receive will land in your account as cash.

If you’d prefer your dividends were automatically reinvested look for the ‘ACC’ (accumulation) class. 

We talk a lot about the benefit of reinvesting dividends, so if you don’t need the cash, reinvesting might be a good idea over the long run. 


Most popular dividend ETFs 

UK dividend ETFs have remained popular with Freetrade investors, with the iShares UK Dividend ETF remaining near the top of the ETF leaderboard year-on-year. The Vanguard FTSE All-World High Dividend Yield ETF also proved popular. 

While a high dividend yield does not necessarily equal a healthy dividend, there could be value to be found in UK dividends. Read more about 2021’s surprising best UK dividend stocks


🏛 Commodity ETFs

As their name suggests, commodity ETFs give you exposure to the commodities sector.

This includes a broad range of assets, ranging from gold and silver to oil and gas.

There’s an important difference to keep in mind though, a commodity ETF that tracks the price of gold is not the same as buying a stock ETF which tracks the price of gold mining companies. 


ETCs (exchange-traded commodities)

Like a commodity ETF, an ETC gives you the ability to track the price of a commodity or a basket of commodities. However, an ETC is built slightly differently. 

As a fund an ETF holds the assets it tracks but an ETC does not. 

When you invest in an ETC you’re actually buying a bond (an asset that generally pays a fixed rate of interest over a fixed time frame) and the return on this bond is linked to the return of the commodity index, say the price of gold or an oil index. 

The key difference between these two designs is that the ETC guarantees the return of the commodity they’re tracking but with an ETF there’s no guarantee that they’ll pay the return the index provides. 

With an ETC, this guarantee comes with slightly more risk, when you buy an ETC you are relying on the person that sold the bond (the issuer) to be able to pay the returns it promised.

For ETFs, there is no guarantee that they’ll pay the return the index provides, so you’re more open to tracking error (a measure of how far an ETF has strayed from its benchmark). But there is a smaller chance of them defaulting.

In practice, these differences have almost no impact on investors. Buying a gold ETC or gold ETF is likely to generate almost identical returns, which is why it’s often the case that no distinction is made between the two.


Most popular commodity ETFs

The most popular commodity choice so far this year remains iShares Physical Gold ETC. 

While it’s come down from the record highs seen last year, the price of gold remains way above pre-pandemic levels. 

People rush to buy gold when they think bad things are going to happen and given the last two years we’ve had, investors demand for gold is understandable. Gold gives investors something tangible that holds value as jewellery or in industrial processes.

What we should point out though is that, while gold might be a popular form of protection for many events, inflation isn’t necessarily one of them. For inflation protection, you might opt for a gold miner (or any other business) which can pass on higher prices to consumers. 

With news of rising inflation levels (short term or otherwise) almost daily, this could partly explain why the demand for gold has softened slightly. 


💡 We’ve written more about protecting your portfolio from inflation. 

🏛 Bond ETFs

Things are a bit less confusing with bond ETFs. 

A bond ETF will typically track the performance of a bond index.

For example, the Vanguard UK Gilt ETF tracks an index that measures the performance of UK government bonds.

The thing to be careful of here is that there are lots of different bonds issued by governments and they’ll also have different maturity dates.

So if, for example, you are looking to invest in short-term UK government debt, make sure you aren’t putting money into a bond ETF that tracks a long-term index.


Most popular bond ETFs 

Bonds have slightly fallen out of favour with Freetrade ETF investors over the last year. With many of 2020’s most popular bond ETFs such as Vanguard USD Corporate Bond ETF and iShares Core UK Gilts falling down the rankings. 

Bonds tend to become less popular with investors when inflation and rising interest rates concerns pick up and these are two things we’ve seen as the UK, US and Europe recover from the pandemic.


🏛 Inverse ETFs


An inverse ETF is a fund that aims to deliver the opposite return to an index. 

Why would you want to hold an inverse ETF? 

Investors tend to use inverse ETFs to protect (or hedge) their portfolio from things not going as planned, a bit like a back up. They also allow investors to profit from falling prices. 


💡 Read more about inverse ETFs


Most popular ETFs on Freetrade 


Here’s a summary of some of the most popular ETFs on Freetrade so far this year. Most popular has been measured as the highest total order value. 

Position ETF ETF ticker
1. Vanguard S&P 500 UCITS ETF (Dist) £VUSA
2. Vanguard FTSE All-World UCITS ETF (Dist) £VWRL
3. Vanguard S&P 500 UCITS ETF (Acc) £VUAG
4. iShares Global Clean Energy UCITS ETF (Dist) £INRG
5. Invesco EQQQ NASDAQ-100 UCITS ETF £EQGB
6. iShares Core FTSE 100 UCITS ETF (Dist) £ISF
7. Vanguard FTSE All-World UCITS ETF (Acc) £VWRP
8. iShares Core S&P 500 UCITS ETF (Dist) £GSPX
9. iShares UK Dividend UCITS ETF (Dist) £IUKD
10. Vanguard FTSE 100 UCITS ETF £VUKE


The above data was valid at 22/09/2021

The weekly updated list of most popular ETFs on Freetrade.

How are ETFs taxed?

ETFs are taxed in much the same way that shares are. 

They can be subject to tax on both capital gains — any profits you make from buying low and selling high — and dividends.

But remember that, even if you invest using a regular share dealing account, you have annual allowances for both capital gains and dividend tax. For the 2021/22 tax year, the capital gains allowance is £12,300 and the dividend allowance is £2,000.

How much you pay if you go over those limits will depend on how much income you make outside of investing. 

But remember too that if you buy UK ETFs in an ISA or a SIPP then you won’t have to pay capital gains or dividends tax on any gains you make.

Stamp duty - the 0.5% tax you pay when you buy most UK-listed stocks - is something you don’t have to pay with ETFs that trade on UK exchanges but are domiciled overseas (that’s the case for most UK-listed ETFs).

Like lots of things in the world of investing, there are always lots of little nuances when it comes to taxes. So if you want to get into the nitty-gritty of the subject then you can read our post about how your investments are taxed.


ETFs in your SIPP 

SIPPs or self-invested personal pensions are a tax-efficient way to save and invest for your retirement and could be a good place to hold your ETFs over the long-term. 

We say long-term because there are restrictions on when you can start taking money out of your SIPP. At the moment you can start at age 55, although that's set to rise in the future. 

SIPPs are tax-efficient for a few reasons. The main ones are: 

  • Your investment gains are free from capital gains tax and UK dividend tax within a SIPP
  • When you pay into a SIPP, you may be able to get some income tax relief 


💡 Deep dive into what is a SIPP pension


ETFs in your ISA

ISAs or individual savings accounts are another tax-efficient way to invest for the long-term and may also be a good account to keep any ETFs in.  

For the tax year 2021/2022 (which ends 5th April 2022) the ISA allowance is £20,000 which you can use to invest in stocks, ETFs, investment trusts and more. 

Inside an ISA, any gains you make from ETFs are free from capital gains tax and UK dividend tax. 

When it comes to taking money out of an ISA, there is no age restriction (like with a SIPP). You can take money out at any time. But once you’ve taken money out of an ISA you will lose your tax-free allowance on that cash. 

Here’s what we mean by tax free allowance. Let’s say you’ve added £16,000 to your ISA this tax year and you withdraw £2,000. While the amount left in your ISA is now £14,000, the remaining amount you can put into your ISA this year is still £4,000. That’s because for most ISAs once you’ve used your ISA allowance once it’s gone.

💡 Deep dive into what is an ISA


🤔 ETFs vs stocks 

You can buy and sell ETFs like stocks, so it’s right to ask, “how is an ETF different from a stock?” and “is it better to buy individual stocks or ETFs?”. 

So, how is an ETF different from a stock? 

The big difference is that with an ETF you're invested in many stocks, not just one. So an ETF gives you the option to spread your money across multiple companies in one go. 

The other main difference is that when you buy a company’s stock you become a part-owner, a shareholder, of that company. But with an ETF, your share represents partial ownership of the fund. So you’ll get exposure to the companies or assets within the fund, you just aren’t the direct owner of those companies, the fund is. 


Is it better to buy individual stocks or ETFs? 

When deciding between stocks and ETFs it's best to think back to their key differences. 

With a stock you are invested in one company and your investment return is dependent on how this one company performs. 

With an ETF, you’ll be invested in a basket of companies and your return will depend on how all of these companies perform. You’ll also have to factor in the ongoing fee the ETF charges. 

ETFs can provide you with quick access to a market or sector if you are not sure of the exact company you’d like to invest in. But as you’re invested in the whole market, your returns will mirror it, you won’t perform better and you won’t be protected from any market drops. 


🤔 ETFs vs investment trusts 

ETFs and investment trusts both trade on exchanges and tend to be made up of a basket of stocks or other assets. 

The key difference between the two is that ETFs are nearly always passive, aiming to track an index, while investment trusts are actively managed. That means they have fund managers that pick stocks or other assets in the hope of generating a greater return. 

In the past, people have often talked about concentration when comparing ETFs and investment trusts. With investment trusts often being invested in fewer companies than an ETF because they can be. 

But in reality, trusts are both diverse and concentrated, it just depends on the fund’s objective and the manager’s approach. 

And for ETFs, not every ETF is diverse. Index ETFs are more diverse but some of the newer ETFs like sector or thematic can be concentrated too. 

You can check the makeup of an investment trust or an ETF by looking at the KID (Key Information Document) which you’ll see on the stock screen in your Freetrade app. 

🤔 ETFs vs mutual funds

Everything that’s just been said about fees applies to mutual funds (or in the UK you’ll likely hear them called open-ended investment companies) too.

Like investment trusts, active mutual funds tend to have a human at the helm trying to beat the market and so they can have higher fees than ETFs.

But another key difference is that mutual funds are not exchange-traded, so you can only buy them at certain points over the course of a market day. There’s normally only one dealing time per fund.

That tends to mean it’s easier to buy and sell ETF holdings than it is for mutual funds, which often have one or two specific dealing points throughout the day.

When it comes to understanding the difference between ETFs and index funds, this is the key difference too. 

While an index fund (like most ETFs) is a passive investment, designed to track the performance of a stock market, basket of stocks or other assets, it is a mutual fund which means it can only be bought or sold at specific times during the day. 


ETFs Summary 

Exchange-traded funds vs Mutal funds vs Investment trusts vs Stocks

ETFs

Mutual funds

Investment trusts

Stocks

...invest in a basket of stocks or other assets and often aim to track the performance of an index. ETFs are funds that trade on a stock exchange and can be bought and sold throughout the day. ...invest in a basket of stocks or other assets and managed by fund managers who often aim to beat market returns. Mutual funds are not traded on a stock exchange so can only be bought or sold at certain points in the day. ...are listed companies that pick and invest in a basket of stocks or other assets. Trust managers often aim to beat a market index. Trusts are traded on a stock exchange, so can be bought or sold throughout the day. ...gives an investor partial ownership of one company. Stocks are traded on a stock exchange, so can be bought or sold throughout the day.


ETF returns 

Most ETFs track an index, which means your investment will generally rise and fall in line with the market it’s invested in. By design, unless they are actively managed, ETFs will never aim to beat the index. 

This means you will likely experience both the market’s highs and lows, so having a long-term time horizon (beyond five years) is crucial. 

ETF investment strategies

ETFs can be a good investment option for someone who would like to limit the amount of investment strategy needed. 

But as with any investment, it's important to keep in mind what you are trying to achieve and a plan to get there. 

Here are a few different ways you could think about investing in ETFs. 


🍕 Buy and hold ETF strategy

ETFs are designed to track the performance of a market, so by investing in an ETF and holding it over the long-term, your returns should mirror that of the market. 

Buy and hold doesn’t mean you need to leave it untouched though, often people will top up ETF investments regularly. 


🍕 Core-Satellite ETF strategy

A core-satellite strategy lets you combine elements of both passive and active investing in your portfolio. 

With ETFs at the core, most of your portfolio will perform in line with the market it’s tracking. And this means you can still get some of the main benefits of ETF investing i.e. a low cost, broad investment.  

By choosing other investments such as investment trusts, stocks or even more specialised ETFs to make up the rest of your portfolio, you can nudge your portfolio into more specific areas. 

Ideally your satellite investments would be areas that you think could grow at a faster rate than the market or be assets (such as bonds or commodities) that might perform well at different times to the rest of your portfolio. 


💡 For more info check out our guide on how to invest in ETFs


ETF trading 

ETFs may have ‘traded’ in their name but it’s not what they were designed for. 

Like index funds, ETFs were designed to provide investors with a low cost way to track the return of a stock market. But to give yourself the best chance of mirroring market returns, you’ll need a long-term time horizon. Or put another way, that’s a firm no to any day trading. 

Trading is generally thought of as a short term investment decision but it’s likely to come at the cost of your long-term investing goals. 

As a short-termer, with each trade you have to get the timing right, consistently buying low and selling high isn’t something many can master. Dipping in and out of the market will likely hurt your returns too. You might miss the worst days but you’ll also miss the best days. 

This plus any ETF dealing fees will likely see you get further away from the market return ( which was what you set out to track in the first place). 

John Bogle, the founder of Vanguard and inventor of the index fund, said the two enemies of the equity investor are emotion and expenses. 

If you are trading ETFs frequently, you are falling into both traps. 

3 steps to investing in ETFs 

  1. Decide if ETFs are the right investment for you

Before investing, it’s important to weigh up your options and give yourself the best chance of choosing the right investment.

Here are a few things to think about before investing in ETFs: 

  • You are happy to invest in a ready-made basket of stocks or other assets 
  • Your aim is to track an index’s performance, not beat it 
  • You’re happy to leave your money invested for at least five years  

  

  1. Choose an ETF 

Once you’ve decided ETFs can fit into your portfolio it’s time to work out which one or which ones. 

Here are a few questions to think about: 

  • Are you just looking for your investments to grow or would you also like your ETFs to provide an income? 
  • Would you prefer to be invested across sectors or in a specific sector? 
  • Are you looking for a passive or actively managed ETF? 
  • How much do the ETFs you are looking at cost?
  • Do you want to invest in a particular region or globally?
  • Think about which investment account to keep your ETFs in. Remember an ISA and SIPP offer tax-efficient investing. 


  1. Check in on your ETFs

As we go through life, our financial goals and circumstances change. Your requirements at age 25, may not be the same as at 35. 

It’s a good idea to check back every so often and ask whether your investments are still doing what they need to do and your asset mix still reflects your risk tolerance, particularly before deciding to sell. 

Here are a few things to think about if you’re considering selling an ETF: 

  • What are your investment needs now? 
  • Why are you selling? Is it due to performance or you’ve found a better alternative?

Finding the best ETFs

The hunt is always on to find the best ETF but the truth is that ‘the best ETF’ doesn’t really exist. 

It’s likely it isn’t just one ETF that fits the bill. 

What’s more, the best ETF for you could look very different to the best ETF for others. It all comes back to our individual investment goals. 


ETF FAQs

Are ETFs a good investment?

A key benefit of ETFs is that they offer a way to invest in a ready-made basket of stocks or other assets in one go, so you don’t have to select everything individually. This can also make them a more cost effective way of investing than buying the stocks individually. 

However, like any other investment, a decision to invest should take into account your personal financial circumstances and goals. Take a look at the ETFs pros and cons section above, to help you decide. 

How is the price of an ETF determined?

There are two key influences on the price of an ETF. 

Like any fund, the price of an ETF is determined by the current value or price of the ETFs underlying holdings. This is known as an ETFs net asset value or NAV. 

As ETFs are bought and sold on a stock exchange, there’s also a supply and demand element that contributes to the ETFs price. 

This means that while an ETF’s NAV is usually in line with its share price, that's not always the case. Lack of demand could see the price deviate from the NAV but so could tracking error and fees.

How do ETFs make money?

ETF fund managers make money by charging investors an annual ongoing fee (look out for the OCF or total expense ratio TER in the KID or Key Information Document), which covers the cost of running the fund. 

Investors can make money from ETFs if the value of their ETF investment increases over time and you are ultimately able to sell the ETF for a higher price than you bought it for. 

Some ETFs also pay investors a dividend which can act as a regular income while you own the ETF.

Are ETFs good for beginners?

ETFs are often said to be a good investment for beginners because they offer a way to spread money across a basket of different stocks or other assets in one go and without investors having to research and select each stock individually. 

This is true, but it is not necessarily a reason that makes ETFs a good investment for beginners or experienced investors. 

ETFs can be a good option for any investor looking to invest in a ready-made basket of stocks and track the performance of an index. 

Can you buy fractional ETFs?

At the moment, you cannot buy fractional ETFs on the Freetrade platform. This is something we are looking into as part of our product road map though. 


‍Important Information

This should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice.

When you invest, your capital is at risk. The value of your portfolio can go down as well as up and you may get back less than you invest. Past performance is not a reliable indicator of future results.

Eligibility to invest in an ISA and the value of tax savings depends on personal circumstances and all tax rules may change.

Before transferring an ISA you should ensure you will not lose valuable guarantees or incur excessive transfer penalties. ISAs are usually transferred as cash so you will be out of the market for a period.

SIPPs are a pension product designed for people who want to make their own investment decisions. You can normally only access the money from age 55 (set to rise to 57 from 6 April 2028). This article is based on current rules, which can change, and tax relief depends on your personal circumstances. 

When you invest, your capital is at risk. The value of your portfolio can go down as well as up and you may get back less than you invest. 

Before transferring a pension you should ensure you will not lose valuable guarantees or incur excessive transfer penalties. Pensions are usually transferred as cash so you will be out of the market for a period.

Freetrade does not currently offer drawdown products for our SIPP.

Freetrade is a trading name of Freetrade Limited, which is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales (no. 09797821).



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