Strategies for Investing in ETFS

ETFS investment

Exchange-traded funds investing have become popular across the globe due to their many benefits. They are more tax-efficient, charge lower costs, and have better performance than mutual funds. As an investor, you will benefit from the ease of use and diversification of ETFS. An exchange-traded fund comes with a price that can change any time. It has a ticker symbol just like a stock, but the number of ETF shares can change regularly, depending on the creation and redemption systems. It means that you can buy and sell an ETF any time you want during the trading period.

Lower Cost Investment

A lot of mutual funds charge a commission, aside from an annual expense ratio for administration and marketing costs. But, the majority of ETFS is managed passively and typically tracks an index. It means that a portfolio manager cannot decide which stocks to sell or buy. With this, the expense ratios of index exchange-traded funds tend to be lower than actively managed ETFS or mutual funds. Another advantage is that an ETF gives exposure to a group of stocks. Therefore, you could have a hundred or more stocks instead of buying and selling lots of individual stocks.

Long or Short Term Investing?

You need to determine first what kind of ETF investor you are before creating your investment portfolio.  If you want to be a long-term investor, consider buying and holding securities according to your risk tolerance and investment horizon. On the other hand, if you are going to be a short-term investor who prefers to jump in and out of the game, and ride hot ETF trends, you need a different risk management plan for this.

The good news is ETFS can make both kinds of investors successful. But, if you have long-term goals, you put more money for goal achievement and less goes into an asset management company, thus adding up the savings over time.

Building A Portfolio

Establish your investment goals and figure out how much risk you can handle before becoming a successful ETF investor. While time horizon and risk tolerance are the main elements in an investment portfolio creation, these two cannot tell the rate of return necessary to accomplish your goals successfully.

To help determine the appropriate time investment horizon and risk tolerance, include other goals investing in your financial plan such as retirement savings, college savings, or home purchase. You can use a financial planning tool online, or you may consult with a financial advisor to find out the needed return rate. After that, you can begin building your exchange-traded fund portfolio.

Get a Good Deal on an Exchange-Traded Fund

You can purchase ETFS in all places where you can obtain a stock. You can buy these exchange-traded funds through a brokerage account or a broker. However, it is important that a brokerage firm can provide you with everything you need before you commit to them. You may ask some questions like how long has an ETF been around, how is it developed, or what does the ETF index track? It would also be useful for you if you know the names of the key players, considering that different providers of exchange-traded funds have different names for their wares.

Assess the ETFS in a similar manner that you would evaluate a mutual fund. After all, you only want an exchange-traded fund investing that can help make your investment plan a success.