Investing in ETFs: What you should know?

If you have not already invested in exchange-traded funds (ETFs), then this blog will explain exactly why it might be a good idea to do just that.

The first ETF – the Toronto Index Participation Fund (TIPs) – was launched in 1989, and since then investment in ETF markets has been huge. Indeed, in May 2017 it was reported that the global ETF market had topped $4 trillion, and their amazing rise in popularity shows no sign of halting any time soon.

Why Trade ETFs?

ETFs offer pooled investment and trading flexibility. To many investors ETFs are appealing as investments thanks to their low-cost fees, tax efficiency, and stock-like qualities – one is able to buy and sell them throughout the day.

ETFs are the ideal investment option for people who wish to invest not in just one company or commodity, but in a whole sector or market trend. Some ETFs even allow shorting the markets, therefore allowing investors to profit from a downward trend.

By owning an ETF an investor gains the diversification of a mutual fund, or scattered portfolio, and it also offers the flexibility of a stock. As such, like with stocks it is possible to short sell ETFs, or buy them on margain and buy just one share, should you wish.

A further advantage: the expense ratios of ETFs tend to be much lower when compared to mutual funds. Usually, when trading ETFs an investor will pay a broker the same commission as per regular trades.