I believe that exchange-traded funds (ETFs) are great investments for share beginners and experts alike.
Investment funds have been around for an extremely long time. But the ability to buy index funds on stock exchanges is what has really changed the landscape for investors.
An index is simply a list of businesses. One of the most well known is the ASX 200 (ASX: XJO), which is 200 of the biggest businesses on the index. You get the biggest exposure to the largest holding of Commonwealth Bank of Australia (ASX: CBA) and a teeny tiny bit of exposure to the 200th position.
When people talk about "the Australian share market", they are usually talking about the ASX 200 or a similar index.
If you let the 'index' decide how much of each ASX share it needs to own it can bring down costs because the human investment managers (and costs) aren't involved.
The Australian share market has generally produced an average return of 10% a year, which is an excellent compounding result for investors. If regular investors can just achieve the market average then we're doing well because a lot of investors don't beat or achieve the market average over the short-term or long-term, particularly when you include fees and costs.
It's the fees and costs that can eat away at your returns like termites on a house. You don't notice it day to day, but it can make a huge difference over many years. And that's why ETFs can be great options for beginners and investing experts alike.
There are some ETF providers that try to make the ETF management fees as low as possible. Two providers that spring to mind are Vanguard and Blackrock. Two of the cheapest (and best) ETFs available to investors on the ASX are Vanguard US Total Market Shares Index ETF (ASX: VTS) and iShares S&P 500 ETF (ASX: IVV).
The cheapest way to access ASX shares is an offering from Betashares, it's the BetaShares Australia 200 ETF (ASX: A200).
Foolish takeaway
I think ETFs are a great way for any investor to get access to the great wealth-building tool of shares. The combination of low costs and good shares is one of the keys to creating excellent wealth along with saving money.
