You have probably heard of DTF or WTF, but not so much about ETF, so WTF is an ETF? ETF stands for Exchange Traded Fund. Remember how “Mutual Funds are like Dating”? ETFs are like Mutual Funds. To refresh your memory, it is a collection of assets that help you invest in a diversified portfolio.
Such as, stocks, bonds, gold, foreign currency, basically any asset. But the main difference is that you own parts of everything, which spreads your risk and allows for a greater diversification. Imagine Roulette? Now you can put money on a few numbers (Stocks) or you can put money on “All the Black” or “Number 1-12” you are still getting the chances of winning off the number but you have also allowed for a greater diversification with the same amount of money.
•Now, since ETF’s are heard of less than Mutual Funds, you probably think it is the ugly stepsister or something that is not recommended to invest in, but in reality it is the exact opposite
•Less internal cost (meaning less fee’s and more money in your pocket)
•Traded throughout the day like a stock (Unlike Mutual Funds, which are based on something called Net Asset Value)
•No minimum investments (Mutual Funds often have a minimum of $2,500)
• Improved Tax Control (You have more control of the your money unlike in Mutual Funds
ETFs are often used in an efficient market and help reduce the cost to the investor, which is huge, especially if you are starting out, you don’t want to pay extra fees that you do not have to, and you want a fairly straight forward transparent portfolio and this is where ETFs really pay off.
20/20 has adopted the Orca mantra and created such low cost trading portfolios for our followers, if you would like to learn more, please contact us.