ARE TRADING EXCHANGE TRADED FUNDS THE FUTURE?
WHAT ARE EXCHANGE TRADED FUNDS?
An Exchange-Traded Fund (ETF) is an investment fund that holds assets such as stocks, commodities, bonds, or foreign currency. An ETF is traded like a stock throughout the trading day at fluctuating prices. They often track indexes, such as the Nasdaq, the S&P 500, the Dow Jones, and the Russell 2000.
Investors in these funds do not directly own the underlying investments, but instead, have an indirect claim and are entitled to a portion of the profits and residual value in case of fund liquidation. Their ownership shares or interest can be readily bought and sold in the secondary market.
WHAT ARE THE DIFFERNT TYPES OF ETF FUNDS?
There are many types of Exchange-Traded Funds. Some of the most common ETFs include:
Stock ETFs — these hold a particular portfolio of equities or stocks and are similar to an index. They can be treated like regular stocks in that they can be sold and purchased for a profit, and are traded on an exchange throughout the trading day.
Index ETFs — these mimic a specific index, such as the S&P 500 Index. They can cover specific sectors, specific classes of stocks, or foreign or emerging markets equities.
Bond ETFs — an exchange-traded fund that is specifically invested in bonds or other fixed-income securities. They may be focused on a particular type of bonds or offer a broadly diversified portfolio of bonds of different types and with varying maturity dates.
Commodity ETFs — hold physical commodities, such as agricultural goods, natural resources, or precious metals. Some commodity exchange-traded funds may hold a combination of investments in a physical commodity along with related equity investments — for example, a gold ETF might have a portfolio that combines holding physical gold with stock shares in gold mining companies.
Currency ETFs — these are invested in a single currency or a basket of various currencies and are widely used by investors who wish to gain exposure to the foreign exchange market without directly trading futures or the forex market. These exchange-traded funds usually track the most popular international currencies such as the U.S. dollar, Canadian dollar, Euro, British pound, and Japanese yen.
Inverse ETFs — An inverse exchange-traded fund is created by using various derivatives to gain profits through short selling when there is a decline in the value of a group of securities or a broad market index.
Actively Managed ETFs — these ETFs are being handled by a manager or an investment team that decides the allocation of portfolio assets. Because they are actively managed, they have higher portfolio turnover rates compared to, for example, index funds.
INVESTING AND TRADING EXCHANGE TRADED FUNDS.
Exchange Traded Funds are a lot easier to track than the average stock company. Especially Penny Stocks. A stock company can go bankrupt because a lot of companies can easily be mismanaged. Also, ETF’s are more focused on a certain sector. Which means the fund can buy and sell certain stocks that deal with that certain sector that can be used to track how a certain sector is doing. You can trade options on them and even short them when in a bear market. Then it can allow you to invest in foreign economies such as China, India, etc. The opportunities are limitless. That is why I would encourage my readers to seriously consider investing in ETF’s into your portfolio.
