Investing 101: What are ETFs?

Image that shows a tag that reads ETFs that is attached to a bag of money.

When you are looking into investing, you’ll come across the term ‘ETFs’. So what is it and who should consider investing in Exchange Traded Funds (ETF) as an investment option?

Exchange Traded Funds are a popular investment vehicle that many people consider.

What are ETFs?

They are investment funds that are traded on stock exchanges, similar to stocks. They offer a way for investors to diversify their portfolios by owning a basket of different assets. These can include stocks, bonds, or commodities.

Provides exposure to a variety of stocks, bonds, and other assetsNot as much return potential as buying individual stocks
Takes guesswork out of stock investingETFs are often low-cost but NOT free and will have to pay brokerage fees
ETFs are easier to buy and sell than mutual funds
Source: Motley Fool
So why should I invest in Exchange Traded Funds?

It is a great option for beginners and novices. With ETF, you will essentially be putting your eggs in a lot of different baskets and diversifying your investment. Of course, with every investment, there’s a form of risk that you have to consider. But, with ETF that level can be slightly reduced as you will have an investment in various companies.

How much money do I need to invest?

With ETF there is no minimum amount, however, if you decide to go with a brokerage then you might need to pay them the cost of one stock in the portfolio. So, make sure that you take a look at the fine print and understand the price of the stock market.

Types of ETFs
  • Equity ETFs
  • Bond ETFs
  • Commodity ETF

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