Investors need to make important decisions by thoroughly assessing all circumstance to ensure that they are able to make the right choice. After all, it is their hard-earned money that is on the line. Because of the complexity of the world of investment, it helps to have tools and sources that will make the task of investors easier. This is why the ETFs are the biggest development the fund industry has enjoyed.
What are ETFs?
ETF stands for Exchange Traded Funds. They offer investors an easy and inexpensive way to make investments across emerging markets and a wide range of other investment opportunities here and abroad. ETFs are also a convenient way to purchase underling securities in a specific index. Because ETFs are structured as a single security and traded on an exchange like stocks, investors can gain access to indexes in just one go.
ETFs have now gained broad acceptance and media exposure, but many people are still wondering what they do and what makes them beneficial. Here are some simple facts about these traded funds to help you understand how they can help you as an investor:
Savings – With the help of ETF managers, investors can keep their fees low. This is by managing a fund that tracks benchmark indexes. Aside from that, ETFs have taxable capital gains distributions that could be lower than your average mutual fund. In the long run, these savings could add up.
Diversification – What’s great with ETFs is that there are options to fit your investment goals. Plus, you can easily diversify your portfolio with just one ETF that contains bonds and stocks. Alternatively, you can choose from certain sectors, geographic regions or specific asset classes.
Market Opportunities – ETFs can have the same flexibility as trading stocks. This means that you know the price within the day, and you can buy and sell during market hours using market, stop-loss or limit orders.
Risk Management – Today, an increasing range of ETFs can help investors hedge currency risk on foreign investments, target particular factors or reduce market volatility.
Regardless of whether you work with a financial manager or manage your investments on your own, ETFs can help you succeed in your financial endeavors.