So, we’re always told to diversify our investments in the market . The downside is that holding many positions with stocks is hard for beginner investors. However, there is another option and it’s a great one. It’s called exchange traded funds and you will grow to love them once you realize their financial investing potential.
Given that a small percent of investors knows what exchange traded funds are . I will assume you’ve maybe heard the phrase but are unsure of how they work and how to take action.
Perhaps Mutual Funds comes to mind , and exchange traded funds are kind of similar, but much better. The thing is, exchange traded funds trade just like stock. You can trade them on whim if you want . But they are far more powerful .
When you invest in an exchange traded fund , you invest in a collection of stocks . For instance , you might buy an exchange traded fund that’s for the retailing segment. Rather than researching tons of stocks and creating many financial positions, you just trade a single ETF you control a segment of that market. Again, you can buy and sell them exactly like stock. It’s great.
Personally, I’ve been trading with exchange traded funds for years and I used them to make money in the gold, oil & gas, etc markets. It’s possible to invest with entire indices, like the NASDAQ-100 , with a single exchange traded fund .
The best part of ETFs is the instant diversification effect. With one pull of the trigger , I get a plethora of related stocks. Imagine you want to profit on an oil boom . What company do you choose ? What if many companies have lots of potential? Do you buy them all? Why bother? Instead, pick a good ETF that has multiple options in it and you’re ready to profit . It’s that easy.
Honestly, I didn’t think about trading ETFs at first . I thought of mutual funds, and I don’t like those. But then I discovered what they were and how they operated. Being able to trade them like stocks as I desired was the big selling point. No load fees, management fees and other pointless junk. It’s a standard stock trade.
And what really sold me on them was the ability to quickly control market segments and profit from it. Gold was heating up so I quickly sunk part of my portfolio into a good gold exchange traded fund and enjoyed watching it go up and up.
After you start investing with exchange traded funds , you might never want to buy regular stocks again. I do both however. If stocks are your passion , ETFs can be used to quickly control a market segment you lack in your portfolio , which can free up your capital for other opportunities .
By the way, I’d be besides myself if I didn’t stress one last time that ETFs can be traded just like stocks. You can place market orders, stop-loss orders and limit orders with them. And yes stock gurus , you can short them! I hope you see how great exchange traded funds are now! One last word of caution I’d encourage to get more education and then go out there and enjoy your newfound investment option.
