Are ETFs Safe?
ETFs are unique and new investment options that offer a plethora of advantages for investors. They are simple to manage and are an incredible addition to a diversified portfolio.
What are ETFs?
Exchange-Traded Funds are simply a group of securities that can be traded through a stock brokerage. They are usually a collection of securities with a common feature, like having to be from a common industry or having similar performance, or being from the same geographical region, etc. They are indexed and traded like a stock. In that sense, ETFs feel a lot like mutual funds, however, the two are traded differently.
For one, ETFs are handled like stocks and can be traded throughout the day whilst mutual funds are traded at the end of the day. ETFs allow for small investments and are cheaper to invest in. Over 8,000 ETFs are traded in the world and there are several kinds to choose from.
You can invest in hundreds of ETFs in the US market using the InvestSika application with ease.
Kinds of ETFs
There are foreign market index ETFs, which track international market indexes and allow traders to have a feel of the international stock market without significant risks. US market Index ETFs allow for emulation of major US market indexes.
Commodity ETFs allow investors to acquire derivative contracts that help them to emulate commodity prices. Foreign currency ETFs allow investors to track a foreign currency or a group of currencies.
Derivative ETFs are non-equity ETFs, having no equities but having contracts with options, futures, etc. Various other kinds of ETFs represent the different asset classes they deal with.
There are bond ETFs, style ETFs, Industry ETFs, etc. Other kinds of ETFs represent the style of managing the ETFs. For example, actively managed ETFs have the best mutual funds and ETFs, and there are many other kinds of ETFs apart from these ones.
Investing in ETFs
ETFs work better with a long-term investment strategy. Some ETFs can trade for much shorter periods, like leveraged ETFs. If you put in a little effort into searching for securities, you would find a lot of ETFs and how long they are traded. You can search particular industries for their related ETFs and find a lot of them to choose from.
Remember to have and stick to your investment objectives. Long, medium, or short-term investment objectives would define your trading behavior and guide the choices you make.
You may also choose to adopt a particular theme or advocacy cause to invest in. There is an ETF that tracks indexes of companies with majority women representation in top executive positions. There is also one that is known as Clean Energy ETF which focuses on clean energy companies.
You can invest fractionally, at the cost you have available rather than the full stock share which could be more expensive but ETFs give you wider access to more stocks.
You can invest in hundreds of ETFs in the US market using the InvestSika application with ease.
Takeaways
ETFs offer a wide range of choices, options, and strategies to investors. This pool of choices can make it difficult for investors to determine what can go wrong with an investment if ETFs are included as part of an investment portfolio basket. Investing in ETFs is not different from investing in other stock options. Do your research and invest wisely. ETFs could be a game-changer.
