How to choose an ETF and how to begin ETF Investing

[Lindsay R]

Hi there,

Now that there is a wide variety of ETFs, how do I settle on one? Similarly, how do I begin the process of trading in ETFs?

[penninah]

Hi Lindsay,

An Exchange Traded Fund – ETF, is a securities basket trading on exchanges similar to stock trading. They have various types of investments, like bonds, stocks, and commodities. Prices fluctuate throughout the day. Some offer local holdings only while others are global.

ETFs present a beginner with an ideal place to venture into investments. Benefits include liquidity, vast investment choices, low threshold of investment, low expense ratios, and so on.

 

Picking an investment strategy

ETFs have numerous traits creating ideal settings for new investors and traders. As a beginner, a good strategy would involve going for asset allocation, swing trading, sector rotation, hedging, seasonal trends, short selling, and dollar-cost averaging.

Where to begin in ETF trading

To trade in ETFs, you have to go through traditional dealers and online brokers. Begin by researching on what the market has to offer in top brokerage firms, and picking one. 

Points to note when starting ETFs investing

ETFs, give you access to numerous stocks across an assortment of industries. Some ETFs focus principally on targeted industries. They present you with an avenue for risk management through their diversified investment instruments.

Remember also that ETFs brokerages have lower commissions and low expense ratios. However, an actively managed ETF will cost you more in brokerage fees. Furthermore, certain ETFs focus on a single industry, limiting diversification.