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.
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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So you have learned about stocks in my previous blog. But how do you choose them?! This part of the blog will look into a very basic of how to make your decision on shares.
I have to warn you, it takes years to master stock picking if you expect extraordinary returns. However, a basic understanding will let you create a portfolio with a reasonable return, and this part of the blog will be a starting point.
Everyone whats to find out whether the stock will go up or down. Guess what, there is no easy answer to this question because everyone would be rich then. Although it is prudent to start with fundamentals. The idea is to try to decide what is a good price to pay for a stock-based on underlining company and not just some speculation.
So let’s begin. There are thousands of stocks traded on international exchanges and around 3K in London. Most of them will not be a suitable investment for you due to various reasons. One could be due to significant transaction costs buying from international exchanges, or the company may have a lot of debt, and when times go bad, it will go broke. It could be simple as stocks became too popular and overvalued.
Based on your needs, risk and expectation you will need to choose between growth stocks or dull-but-worthy and often safer income shares. The difference between the two broadly are as follows:
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After I have created my blog and started writing about investment, I, also, started investigated what else is available on the internet. Pages like Investopedia, which is a great source. Also, I come about the same name book as my blog, with some great short videos from the author. Therefore, I have decided to share these with you.
Have fun watching. This will help you better understand subjects we will review in the future blogs. Also, keep your mind open there isn’t just one investment strategy. Continue reading →