Exchange Traded Funds (ETFs) get talked about a lot, so here is my cheater guide on what they are 📝
An ETF is a group (portfolio) of stocks, bonds, funds or other investment tools. It is like a mutual fund in that sense, people pool their money together and have a wicked smart team of managers make investment decisions on their behalf.
Their very existence has driven down the cost of investing dramatically! Over the past ten years, fees on pooled investments (mutual funds and ETFs) have plummeted, largely because ETFs offer access to investors at a fraction of the cost that mutual funds used to. Competition is good for everyone.
💡The best times to use an ETF in your portfolio?💡
🔺In my opinion, the best use of ETFs is for passive investors. Passive investors say/believe things like, ‘the markets will always go up’, ‘a 1% fee will erode my returns’, or ‘I know putting my money into the market and forgetting about it will always pay off.’
🔺You can get an index tracking ETF for like 0.20% fee. Most mutual funds will be a full percent higher than that.
🔺Also, if you – Mrs. Investor – believe in a trend but do not have the time, nor the expertise, to do the research you can buy an ETF that gives you exposure to your idea.
For example, if you believed that cryptocurrency was the future, but didn’t know if Bitcoin or Dogecoin was the way to go, you could buy Purpose Investments Bitcoin ETF (BTCC) and own a piece of several crypto companies (disclaimer: this is definitely not a recommendation, they just happened to be the first ETF to pop up when I Googled it – do your research or get an advisor! :)).
Do you have any good or bad experiences worth sharing regarding ETFs?
ᴍᴜᴛᴜᴀʟ ꜰᴜɴᴅꜱ, ᴇxᴇᴍᴘᴛ ᴍᴀʀᴋᴇᴛ ᴘʀᴏᴅᴜᴄᴛꜱ ᴀɴᴅ/ᴏʀ ᴇxᴄʜᴀɴɢᴇ ᴛʀᴀᴅᴇᴅ ꜰᴜɴᴅꜱ ᴀʀᴇ ᴏꜰꜰᴇʀᴇᴅ ᴛʜʀᴏᴜɢʜ ɪɴᴠᴇꜱᴛɪᴀ ꜰɪɴᴀɴᴄɪᴀʟ ꜱᴇʀᴠɪᴄᴇꜱ ɪɴᴄ.