How to invest in etfs
Exchange traded funds (ETFs) have changed the face of investing for individuals as well as institutions.
These relatively new investment tools have made it easier to play sector rotations, go short the market or even leverage positions.
Yet at this point in the market cycle, this leverage becomes a double-edged sword for a particular set of ETFs: the Ultra set.
You see, investors like me who adopt a macro, top-down approach often want to use ETFs to take a position on an enticing sector.
Having made that decision, we're then tempted by Ultra ETFs, which offer us the possibility of 2x or 3x our gains.
Resist the temptation.
Investing In ETFs: How Exchange-Traded Funds Can Save You Money
High commissions and management fees, along with taxes, can really cut into your returns.
That's where exchange-traded funds, or ETFs, come in. In today's investment world, ETFs are cheaper and more tax-friendly than mutual funds.
The average expense ratio for U.S.-listed ETFs is 0.4%, compared with 1.42% for diversified U.S. stock funds.They also give you exposure to an entire industry or market with the click of a mouse.
It's one of the reasons why exchange-traded funds are quickly becoming the investment of choice for investors seeking broad market exposure.
In fact, the number of ETFs has surged over 10-fold in the last decade.
The total number of ETFs in the market grew to 1,114 by October 2011, with assets over $1 trillion, according to the Investment Company Institute.
And the ETF market will expand to roughly $3.1 trillion by 2016, according to projections from the Financial Research Corp. in Boston.
So if you're looking to diversify your portfolio and save money doing it, ETFs may be the way to go.
Here's a primer on how ETFs can work for you.
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