ETFs or Exchange Traded Funds are one of the best ways for the average investor to invest. This article will show you how to do it.
Open a brokerage account at a discount broker such as Scottrade or Schwab.
Figure out what parts of the economy you want to invest in. If you want to invest in real estate, there’s an ETF for that. Commodities? Sure. Oil, more specifically? There are quite a few ETFs for that. If you can think of it there is probably an ETF for it.
Understand what you are buying. An ETF is similar to a mutual fund, in that it is a collection of stocks within a sector. But they are different in that ETFs are traded throughout the day like a stock vs. just the end of the day like a mutual fund.
Understand the advantages of ETFs. ETFs spread risk like mutual funds. ETFs, in theory, are more stable that their constituent components. This is mostly true.
You can also “day trade” ETFs.
ETFs don’t have large “loads” like mutual funds. You will of course pay your broker a comission.
You can short ETFs. In other words you can bet that an ETF will go down in value. One can not do this with mutual funds.
Build a portfolio of ETFs like you would with stocks or mutual funds. Keep a balance of bonds, equities, and commodities appropriate for your gastronomic disposition. Always make sure all your investments won’t induce vomiting if they go the wrong way.