I was reading the Globe and Mail “Report on Business” section last week and it talked about ETFs. I have heard the term numerous times, but honestly don’t know a lot about them. So I decided to find out.
What does ETF stand for?
ETF is short for Exchange Traded Fund.
Okay, great. So, what exactly is an Exchange Traded Fund (ETF)?
The easiest way to understand ETFs is to think of them as mutual funds that trade like stocks. An ETF holds assets, such as stocks, commodities, or bonds. It usually tracks an index – such as a bond index or a stock index. They are actually traded like a stock on an exchange, and their value can go up and down during the course of a trading day.
Why would I want to buy one?
There are various reasons people may want to consider buying an ETF:
· You get the diversification of an index fund, but the added bonus of being able to sell short, buy on margin and purchase as little as one share.
· The expense ratios for most ETFs are lower than those of the average mutual fund.
So, which one should I buy?
Sorry – that’s beyond the scope of my knowledge! If I had a head for investing at all, I wouldn’t need a day job! There are lots of ETFs out there, dealing in anything from gold and silver, to crude oil. It all depends on what you’re looking for, and what is most important to you. A good place to start learning more would be the Global and Mail ETF page.
Have you ever invested in ETFs? If so, have you been happy with them? Or are you like me, and just learning what they are?
I’m just learning about stuff like ETFs too, but I’ve been recommended to buy some to add diversification to my investment portfolio. So it’s definitely something I need to learn more about. With so much to learn about investing, it is just tough to find the time to get started.
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MM – yup, you don’t want to rush into it. I think one of the biggest things about investing is knowing about fees – that’s what I didn’t look carefully enough into when I started..sigh..
I’ve never heard about ETF’s. Thanks for bringing this up and linking to an info page. If you hadn’t mentioned this I may have never known.
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Glad you found it useful!
Very interesting, I also did not know these existed. Thanks for the info!
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I like ETF’s because their fees are so cheap. I would probably never need to trade on in a day. Most of my investments right now are in my IRA through my work, but what little I’ve started investing on my own goes into things like the Vanguard Total Stock Market ETF. Seems like I hit a little of everything in there.
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Yes, I don’t know a lot about Vanguard, but what I’ve read sounds good..