Exchange-traded funds (ETFs) are investment funds traded on the stock exchange. These are a popular option for investors looking to grow their money with both short and long-term time horizons. ETFs are traded just like ordinary shares on the exchange. This is different from traditional mutual funds, which only allow you to trade at the end of a business day.
Many ETFs track major indices like the S&P 500 or the Dow Jones Industrial Average, sector, etc. ETF can get exposure to an entire sector by trading just one share.
ETFs have many advantages like they are easy to trade. They are listed on the exchange and can be traded through a brokerage account. Another advantage is that by trading just one share, one can get exposure to an entire sector or market. Through ETFs, all corners of the market can now be accessed by any investor. One can even short sell the market when the market is going down.
As is commonly known that it is never a good idea to buy an investment without understanding the risks involved. And like all investments, ETFs also come with risks. Although it is generally believed that riskier investments lead to higher returns, and ETFs tend to follow that pattern. Diverse, broad market funds and funds focused on bonds tend to offer the lowest risk. Commodity, option, and narrower funds usually bring you more risk and volatility.
While buying an ETF one should ensure to consider its underlying assets as you are not buying shares of a company’s stock directly. Instead, your money goes into a fund that buys a collection of stocks on your behalf.
Management fees and operating expenses are also a consideration for choosing an ETF. In August 2018, Fidelity released two new ETFs that are 100% fee-free. These cutting-edge ETFs are a very new concept. Prior to that, competitive ETFs from companies like Vanguard, Fidelity, and Schwab led the competition with low fees sometimes under 0.1%. The most expensive ETF, according to Bloomberg, charges 9.2%. This must be compared to multiple ETFs. Many major brokerages now offer a selection of ETFs that investors can trade commission-free, and that gives them a cost advantage relative to individual stocks.
Veye Pty Ltd(ABN 58 623 120 865), holds (AFSL No. 523157 ). All information provided by Veye Pty Ltd through its website, reports, and newsletters is general financial product advice only and should not be considered a personal recommendation to buy or sell any asset or security. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation, or needs. You should look at the Product Disclosure Statement or other offer document associated with the security or product before making a decision on acquiring the security or product. You can refer to our Terms & Conditions and Financial Services Guide for more information. Any recommendation contained herein may not be suitable for all investors as it does not take into account your personal financial needs or investment objectives. Although Veye takes the utmost care to ensure accuracy of the content and that the information is gathered and processed from reliable resources, we strongly recommend that you seek professional advice from your financial advisor or stockbroker before making any investment decision based on any of our recommendations. All the information we share represents our views on the date of publishing as stocks are subject to real time changes and therefore may change without notice. Please remember that investments can go up and down and past performance is not necessarily indicative of future returns. We request our readers not to interpret our reports as direct recommendations. To the extent permitted by law, Veye Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss, or data corruption) (as mentioned on the website www.veye.com.au), and confirms that the employees and/or associates of Veye Pty Ltd do not hold positions in any of the financial products covered on the website on the date of publishing this report. Veye Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services.