A
n ETF is the perfect solution if you are not financial savvy, but still want some interesting returns. Simply put, an ETF is a new type of mutual fund that tracks indexes such as the most well-known S&P500. It is not trying to win the market, it’s simply replicating it.
ETF
The massive difference between this type of mutual fund is being an exchange-traded fund, meaning you can buy shares as you would buy shares in a stock.
Still, why does that mean that it is the perfect solution? For starters, they’re available for all types of investors. Either small, big or shark investors can profit from an ETF. One of its beauties is the diversification that it offers. When you buy a unit, you’re buying from a portfolio with a number of different stocks and investments, mitigating the risk of buying one single stock for example.
Money distribution or reinvestment
On top of that, they don’t require any management. They track indexes, so you won’t need a portfolio manager to be actively playing the market. Just like stocks, you can buy them throughout the day in any online brokerage and just hold them, without spending hefty fees in a financial advisor/manager and banks.
ETFs are paid in dividends in two ways: money distribution or reinvestment in more shares. The type of payment depends exclusively on the ETF.
The traditional market
Considering today’s traditional market where we have to pay heavy fees to our bank or be a financial shark to be active in the market, ETFs offer the best of both worlds – passive management, low costs and low-price entry.
