ETF (Exchange Traded Funds) – What is this!?!

I am back, had some busy weekends. Moved to a new place. Hope new home will help to deliver even better content to this blog. Today, we will continue with the subject of various assets. The particular asset we will be reviewing will be ETFs. I personally believe that this is one of the best options for many retail customers and is a fantastic tool to diversify your portfolio with minimal time, cost and effort. Also one of the easiest way to invest in foreign countries with minimal cost.

ETF Definition:

There are many options for ETFs in the market. It can be a bit overwhelming, they can cover various assets, regions, sectors and markets. The key thing to keep in mind, you what to minimise cost and get good diversification, also need to look into your overall portfolio and make sure that there are no considerable overlapping. For example, if you have a significant investment in technology stocks, you need to ensure that your ETF has lower exposure in this sector. Of course, if you like more exposure opposite is true.

Let’s go now via name and what means:

Exchange – The asset class is traded on some exchange like LSE or NYSE. This is a venue, where buyers and sellers can exchange financial products like ETFs, stocks, bonds.

Traded – You can buy and sell this product in exchanges any time while these are open.

Fund – Mean that include multiple assets in a particular combination.

ETFs are run by computers, thus, low running cost (0.2%-0.8%). You can have ETF tracking FTSE 100, small-cap stocks in all over the world, world index, bond index, etc.

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