Buying assets is a good starting point for investing your money. Admittedly, there are a lot of different markets to invest in, like stocks, Cryptocurrency, ETFs, and the list goes on… but what exactly is an ETF?
The initial idea of Exchanged Traded Funds (ETFs) was created a long time ago, but is it worth mentioning that ETFs are among the most reliable and valuable securities in which you can invest your money. More specifically, it represents an index that is dictated by the values of each participated asset. An ETF product could be made up to track a single commodity or even a large number of securities. Like any other asset, you can buy and sell an ETF during a trading day when the market opens. Practically owning such a product means that you possess a different number of shares of the included stocks depending on the process and your portfolio. The number of shares could change because of the relentless creation of new ones. Following the right trading strategies is essential to trade ETFs successfully and making a respectful amount of money.
Types of ETFs
1. Bonds ETFs
2. Commodities ETFs
3. Stocks ETFs
4. Currency ETFs
5. Inverse ETFs
6. Active and passive equity ETFs
7. Multi-Asset ETFs
Moreover, there are some additional and important benefits that you appreciate when you trade ETFs relative to traditional stocks. Unfortunately, there are some caveats to investing in ETFs…
Advantages
1. ETFs usually focus on a specific industry and make it easier to predict and have better risk management
2. Better risk management through the diversity of the owned assets
3. Access-buying various stocks and industries at once
4. Lower commissions
5. Possibly reduced taxes
Disadvantages
1. Single industries ETFs have lower diversification thus this could potentially increase the risk
2. Low trading volume
3. Transaction settlement difficulty
4. Trading fees depend on the broker
Concluding, trading options are numerous and therefore you need to choose carefully… ETFs are for sure an investing alternative that you have to consider following.
