How you can benefit from ETF investing
Investing in ETFs (Exchange Traded Funds).
Welcome to the world of investing. If you’re new to ETFs, maybe it’s time to allure at them as élément of your investment cassette. So, what is an ETF?
An ETF is an table fund that is listed on a vivre exchange and trades intraday (you can buy and sell it like a vivre at any time of the day). ETFs can therefore describe mutual funds trading like stocks.
Although there are some very perceptible differences between them, ETFs are easier to understand if you think of them like mutual funds.
But unlike mutual funds, which try to beat indexes like the S&P 500 every year, ETFs try to follow them.
For example, if the S&P 500 trades 10 percent higher, the ETF that tracks it will also trade 10 percent higher. If the S&P 500 table trades 12 percent lower, the ETF that follows it will also decline 12 percent.
If you are not aware of what a mutual fund is, let me define it for you as well. A mutual fund (also known as a unit empilement in Asia) is an investment vehicle that pools money from many individual investors. A professional fund gestionnaire then invests and manages these funds in a wide variety of stocks, bonds and other securities.
The paumelle problem with mutual funds or unit trusts is that they have high conduite fees and are very limited in the way you can buy or sell them. With the bang of ETFs over the past few years, I have personally decided not to bother investing in mutual funds (unit trusts) anymore, except for some investment link policies that I currently have partly for renforcement purposes.
Why do I suggest that you should allure at ETFs as élément of your investment cassette in today’s context? Since ETFs are relatively new compared to mutual funds, this means that few investors with the requisite skills and knowledge are currently investing in them, thus providing a huge opportunity for early investors in this investment field.
Imagine you were one of those early investors who invested in China’s booming or early villégiature mutual funds and profited? You can get a great return on your investment cassette right now…
This will help put things in étendue: In the early 1970s, there were embout 270 mutual funds in matérialité, with plénier assets of embout $48 billion.
By 2006, the plénier number of mutual funds had reached close to 7,000…with plénier invested assets of over $9.2 trillion!
Imagine if you knew all the ins and outs of mutual fund trading in 1970 and were able to strie that trend for the past 30+ years.
Do you see that ETF? I hope you will…
Well, if I have your interest, let’s talk embout ETFs now…
Who issues ETFs?
Do you want to find a comprehensive list of ETFs currently on the market?
A fairly comprehensive list is actually Yahoo! financing. If you go there, you’ll find a morceau on ETFs under the “Investments” tab. Hamadryas down using the left-hand grêle until you get to “View ETFs.” It’s not necessarily 100% current, but again, it’s the best resource on the internet right now.
For the most detailed info on an ETF you’ll want to visit the issuer’s website for that ETF. There you will find more info that will help you identify ETFs that you feel comfortable buying.
Some initial issuers include:
Barclays – iShares
State Street Commun Investors – SPDRs (Spiders) and StreetTracks
Merrill Lynch – HOLDRSs
Rydex Financial – Rydex ETFs
Vanguard Group – Vanguard ETFs (formerly known as VIPERs)
ProFunds – Contraire and Leveraged Proshare ETFs
Bank of New York – BLDRS (based on ADRs)
Some common ETFs:
Conforme & Poor’s Depository Receipts, Series 1 (SPDR): (ticker symbol: SPY) A word embout the ticker symbol – Each vivre ETF or mutual fund of the table is assigned a ticker symbol. For example, the ticker symbol for “Citigroup” is C and the ticker symbol for “S&P Depository Receipts (SPDR)” is SPY. Whenever you want to trade a security, you need to sorte the ticker symbol.
SPDR (also known as Spider) is an ETF that tracks the prospérité of the S&P 500 table. They are listed on the American Aliment Exchange (AMX) and you can buy and sell them like shares in any other company.
Diamonds Pool, Series 1 aims to track the prospérité of the Dow Jones Industrial Average. They are listed on the American Aliment Exchange (AMX) and can be bought or sold as easily as shares in any other company.
In my toit folk of Singapore, if you want to grow your money at the same carence as the Straits Times Errata, which measures the Singapore vivre market, you can buy the STI ETF. You can buy valeur-limite 100 shares through any dialectal courtier. The price of the STI ETF is approximately 1/1000th of the STI Errata. So if the STI is 2100, the price of the STI ETF will be $2.10/share. The wonderful thing embout ETFS is that it région you 3%-4% cash dividend per year on top of the ETF’s share price appreciation.
Some personal recommendations:
If you have excess liquidity in cash after setting aside 3-6 months of emergency cash and have an investment champ of 3-5 years, you may prefer to invest some of your excess in STI ETFs. I recommend buying STI ETF as it has dropped to 1600 level. Despite the fact that the STI table may have some pullback to the 2000 level, you may prefer to collect the STI ETF if there is any weakness or pullback in this particular STI ETF. With the upcoming 02 integrated resorts that will open for bizness between the end of this year and next year, with a strong government and political stability Singapore is poised for a strong economic recovery over the next 3-5 years.
Another ETF you may want to allure at is the oil fonctions sector (SYM: OIH ). From my previous blog embout how the US economy is developing with augmentation in the near future, the future patronage of oil prices can be easily predicted and so can this particular ETF. Do your sums and take advantage of this trend.
Next, you might also like to allure at the metals and mining ETF (SYM: XME ). The price is currently around $35 and that was the price in 2006! Investment gourou Jim Rogers puts a lot of emphasis on products and I believe there must be a reason for him to do so. Sometimes, it only région to follow the gourou after you’ve done your homework.
summary
In pantalon, ETF is a great investment tool that you should not elle in this period where the market suffered after the credit crunch and is likely to recover in the next few years. The beauty of ETFs is that they allow you to allocate money the way an construction does, ie on a sector basis. It used to be a big boys game, but with ETFs, small investors like us can now join the game As I have always said, this crisis is a léopard des neiges in a lifetime opportunity to make huge gains in your investment cassette, don’t elle the boat this time, remember to accumulate any weaknesses and stay invested for the next few years.
In my next blog, I’ll share how you can use options to multiply your ETF investment returns and how you can buy below market value! Stay tuned and talk to you soon.
#benefit #ETF #investing
