Learn The Stock Market And How to Trade

Exchange Traded Funds (ETF’s) as the name implies are a sort of fund that is traded on the stock market.  Like Mutual Funds they are a grouping of stocks or bonds that try to track the overall return of the combined investment.  Unlike mutual funds however they are traded over a stock market such as the Nasdaq or the Dow and are something to consider when buying stocks yourself. 

Exchange Traded Funds allow an investor to invest in a large number of stocks thereby obtaining some level of diversification in their portfolio.  ETF’s are easy to get into as well as get out of as they are essentially the same as buying and selling any stock.  How long you hold them depends on your investment style or strategy.

Besides diversification there are many other advantages to Exchange Traded Funds when buying stocks, they tend to have lower costs as they are often not managed like mutual funds tend to be.   Unlike some mutual funds ETF’s are very transparent.  They are easily bought and sold at market prices any time during a trading day whereas mutual funds are purchased at the end of the day regardless of when you placed your order.  This also allows the investor to place strike points on their purchases or sales of an ETF.

Like mutual funds there are a wide variety of ETF classifications such as Income ETF’s that try to track the performance of a particular stock market, Commodity ETF’s that track certain commodities such as precious metals or futures.  There are also Bond ETF’s that track a wide array of bonds as well as Currency ETF’s tracking many of the world currencies.

One interesting area of exchange traded funds is inverse investing where the ETF can be used to invest in opposing market trends.  These use derivatives to try to obtain returns that are opposing the market.  For example a Bear market ETF can make gains in a declining market environment.

As with all investing ETF’s come with risk.  It is up to the investor to do his or her own research and decide if exchange traded funds are a worth while investment vehicle for their portfolio.

Related posts:

1. Stock Market ETF (Exchange Traded Fund)
2. Stock Investing Guide For Beginners
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4. Stock Market Investing – Your Guide to Success
5. Stock Market Investing