Investing in an ETF in practice

An ETF, or exchange-traded fund , replicates the performance of a stock market index such as the CAC 40 , the MSCI World or the Nasdaq-100 . It trades continuously on the financial markets, like a stock.

To learn the basics, we invite you to consult this guide to ETF investing offered by XTB, one of the most popular brokers in Europe.

Steps to Investing in an ETF

• Choosing a reliable online broker
• Open a securities account or a PEA (Share Savings Plan)
• Select one or more ETFs based on your objectives
• Place a buy order through the broker's platform
• Monitor and adjust your portfolio according to your needs

Why invest in an ETF?

ETFs offer instant exposure to a multitude of assets for low management fees . Unlike traditional investment funds, they are generally passive : they simply replicate an index, without attempting to beat it. This avoids additional costs and human management errors.

Main advantages of ETFs

• Automatic diversification : a single ETF can cover hundreds of companies
• Low costs : management fees often less than 0.20% per year
• Liquidity : ETFs are bought and sold in real time
• Transparency : the composition is public and mechanically replicated

Understanding the different types of ETFs

There are several different types of ETFs, each with its own unique characteristics. Understanding these differences will help you make a choice that's right for you.

ETF by underlying type

• Equity ETFs : replicate stock market indices such as the S&P 500 or the DAX
• Bond ETFs debt securities indices (Treasury bills, corporate bonds, etc.)
• Commodity ETFs : provide exposure to gold, oil or silver
• Sector ETFs : target a sector of activity (technology, health, energy, etc.)
• Geographic ETFs : focus on an area such as Europe , the United States , or emerging markets

Physical vs. Synthetic ETFs

• Physical ETFs : actually buy the assets in the index
• Synthetic ETFs : Use derivatives to replicate performance

Physical ETFs are preferred by most retail investors for their simplicity and transparency.

Should you use a PEA or a securities account?

In France, two tax-free investment packages allow you to invest in the stock market: the PEA ( Plan) and the ordinary securities account (CTO). Not all ETFs are eligible for the PEA, but this package offers attractive tax benefits after 5 years.

Quick comparison

How to choose a good ETF?

Choosing an ETF depends on your goals, investment horizon, and risk appetite. Here are the criteria to consider before buying.

Key elements to analyze

• Index followed : the best known is not always the most efficient
• Management fees : the lower the better

• replication
  is preferred, as it offers more transparency and limits counterparty risk associated with derivatives used in synthetic ETFs.
  Physical or synthetic, depending on the chosen strategy. US ETFs, often physical, are only accessible via CTO.

• Listing currency : beware of exchange rate risk if the ETF is in dollars
• Assets under management : avoid ETFs that are too small (less than €100 million)
• Eligibility for the PEA if you invest within this framework
• Distribution policy : capitalizing (reinvests dividends) or distributing (pays dividends)

Concrete examples of popular ETFs

Here are some of the most used ETFs by European investors.

• Lyxor MSCI World (EWLD) : access to global equities (PEA eligible)
• Amundi S&P 500 UCITS ETF : exposure to the US market with low fees
• Xtrackers MSCI Emerging Markets UCITS ETF : For investors seeking growth in emerging markets such as China or India.
• iShares Core MSCI World UCITS ETF : very popular accumulating version
• Lyxor PEA Nasdaq-100 : Nasdaq ETF eligible for PEA

What strategy should you adopt with ETFs?

ETFs fit perfectly into a long-term investment strategy. The most recommended approach for a beginner is passive management with programmed investment .

Dollar Cost Averaging (DCA)

DCA involves investing the same amount each month, regardless of market levels. This helps smooth entry points and limit emotional impact .

Example of a simple strategy

• €100 per month on a global capitalizing ETF
• Allocation: 80% global equities / 20% bonds
• Rebalancing once a year

This method avoids "timing" the market, which is often counterproductive for individuals. DCA reduces average volatility without significantly sacrificing long-term performance.

Risks to know before investing

Although ETFs are considered simple and accessible, they carry risks that should not be overlooked.

The main risks

• Market risk : capital loss if the index falls
• Currency risk : if the ETF is in a foreign currency
• Liquidity risk : Some thinly traded ETFs may have a high spread
• Risk of tracking error : the ETF may deviate slightly from the index
• Counterparty risk : especially for synthetic ETFs

How much does it take to get started?

It's possible to invest in ETFs from €10 to €50, depending on the platform. Some brokers even offer fractional buying, allowing you to purchase a portion of an ETF instead of a full share.

For a beginner, a balanced ETF portfolio can be built with a few hundred euros and will grow over time with regular payments.

Conclusion

Investing in an ETF is today one of the simplest and most effective ways to build a diversified, accessible, and high-performing portfolio. Whether through a PEA (share savings plan) or a CTO (collective investment plan), with a few dozen or several thousand euros, ETFs adapt to all investor profiles.