ETF Trading
Exchange Traded Funds (ETF) have been gaining attention recently and are quickly becoming the preferred alternative to mutual funds.
What Is An Exchange Traded Fund?
ETFs are securities that are made up of many different stocks. In that way, it’s quite similar to a mutual fund. However, with and ETF, the stocks all have something in common (we’ll get to why that’s such a huge advantage in a bit). It may be based on an index or an industry sector. Those are the most common. Sometimes, a fund may be based on the country the companies are tied to, but this isn’t common.
Like mutual funds, ETFs are diversified investments, so your risk of loss is roughly the same as it would be with mutual funds. However, they hold several advantages over mutual funds.
Top 4 Benefits Of Exchange Traded Funds
1) Trending – Due to the fact that the stocks all have something in common, they tend to trend more predictably that regular stocks. That means whether the trend goes up or down, you can make significant returns with very little effort (Learn how to make money from ETF Trend Trading). This is the biggest advantage and the reason why you should consider adding ETFs to your portfolio.
2) Bought And Sold Like Stocks – And ETF is bought and sold just like a regular stock so stop-loss and limit orders are available. ETFs, unlike mutual funds, are quite liquid investments, and some trade millions of shares per day.
3) Lower Fees – Another selling point of ETFs is their low fees, some as low as .2%. Since the companies all have something in common, the amount spent on market analysis is significantly reduced.
4) Transparency – While a mutual fund only reports their holdings twice a year, an ETF can be viewed in real time any time you want.
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