If you read this article, you may have become curious about ETFs. But what is etf stock? How to invest in ETFs, what are the most popular ETFs and what should you be careful about?
What is an ETF?
ETFs mean "exchange traded funds" and this term explains almost everything. These are mutual funds with units available to be traded on the stock market.
ETFs are considered to be less risky than stocks. Why? Because they are less exposed to drops. ETFs are mutual funds that buy multiple instruments from a specific category. Stocks? An ETF will consist of shares of an entire index or industry. Commodities? An ETF will be based on the stocks of all companies involved in mining from a particular market. Bonds? There are plenty of ETFs related to government, corporate and municipal bonds. Diversification makes ETFs so good.
So how to invest in it?
Ok, if you already know what is etf stock and have some money due to seasonal work or Paidwork, you may be wondering how to invest in exchange traded funds. The answer is brokerage accounts. There are many companies on the market worth recommendation. We were convinced by XTB, Trading 212 and Nagamarkets.
Types of ETFs
Index ETFs - they reflect the behavior of the most popular indices, such as S&P500, NASDAQ, DAX or SMI. This is the most popular choice for investors.
Bond ETFs - these are indexes that follow the prices of specific bonds. There are ETFs that aggregate government, corporate and municipal bonds. Some exchange traded funds are a mix of bonds. This is the safest choice.
Commodity ETFs are the choice for more experienced investors. When investing in exchange traded funds related to commodities, you must be ready for high price fluctuations, but also for potentially high returns.
The best ETFs for beginners
If you are an experienced investor, you perfectly know which exchange traded funds are worth considering. Beginners may have a little harder job, so here are some highlights that will probably allow you to make good money.
- The Invesco S&P 500 GARP ETF - a fairly expensive, but very profitable ETF with an average return of 16.9% (last 5 years).
- iShares Russell Top 200 Growth ETF - a cheaper and equally tempting ETF with an average return of 17.4% (last 5 years). Note that the risk is a bit higher.
- Vanguard Mega Cap Growth ETF - incredibly low commission and only slightly lower return at 15.9%. This ETF is a good choice for long-term investors.
- Equity United States Energy - this is a commodity ETF, with a higher level of risk that can pay off. It has earned 81.85% over the last 3 years!
How much money for an ETF?
You may be thinking that investing in ETFs requires a lot of money. Absolutely not! One of the biggest advantages of exchange traded funds is the low barrier of entry. In practice, you only need as little as $100 to start investing in ETFs. You can earn such a sum easily, just use Paidwork, hire yourself as a virtual assistant or become a proofreader. Let's get started!
Remember that this article is not investment advice and should not be treated as such. Investing always involves risk, and you should only make financial decisions on your own. Always be aware of the possibility of loss due to changes in the economy or trends in the markets.
