What is a ETF Investment?

   

If you’re a novice investor, an ETF investment – or more commonly referred to as exchange-traded fund – is a good first step. These types of funds are favored by investors because of their convenience, simplicity and low cost – so they are a great option for new investors looking to start a portfolio. An ETF can be comprised of a collection of stocks, commodities, currencies or designed to track a particular market index or even a specific market sector.

Like mutual funds, ETFs offer the same benefit of diversification through a single investment. However, since ETFs are not actively managed they usually have lower operating expenses than mutual funds.

Unlike mutual funds, ETF investments can be bought, sold and traded on the stock market like regular stock shares.

ETF investment has quickly become a popular mode of investing, making them very common in the stock market and amongst brokerage firms. In fact, many firms are putting together their own ETF groups to create more choices for the modern investor. Since this type of investment vehicle is widely offered, you can opt to explore ETF options on your own without having to work with a broker if you are so inclined.

Buying ETFs

If you are interested in making an ETF invesment, you will need to open a brokerage account through a traditional or online firm. Professional brokers can help you through the process, but you should become well aware of the associated commission fees brokers charge. Alternatively, you can do your own research and work with a discount or online firm. After you account is approved, you can purchase an ETF as you would purchase a stock; they can be bought in increments as small as a single share. As you are conducting your research, be sure to figure out which index the ETF fund tracks, what the fund’s largest holdings are, and what the fund’s expense ratio is. Furthermore, you should consider the fund’s dividend yield, which measures how much income it generates from both dividends and assets. Generally, funds with larger assets charge lower fees, so choose accordingly.

As with other stocks, you should keep tabs on what the current ETF investment trends are so that you can continue to buy, sell, and trade your shares wisely. InvestorPlace offers the latest news in exchange-traded funds as well as expert perspectives, so if you are interested in pursuing these types of investments, know that InvestorPlace is a source you can trust to continually provide the latest ETF Investment news.