What are ETFs?
How ETFs allow you to buy whole markets like a stock.
Exchange-traded funds (ETFs) track the movements of an index, making it easy to invest in a whole host of markets – from European shares to US government bonds and gold. Like Amazon and Radiohead, ETFs have exploded in popularity since being launched in the 90’s – and there are now about 5,000 globally investing more than $5 trillion. 🤯
ETFs have many similarities with traditional tracker or index funds, which also copy the performance of an index such as the S&P 500. But their particular success is largely due to the ways they resemble stocks.
How are they like stocks?
Well, as the name suggests, ETFs trade on exchanges 💱 (venues that connect people wanting to buy with those looking to sell). This means they can be bought or sold at any time during the working day – unlike most traditional funds, which can typically only change hands once a day, usually at the end of the day.
And, as with stocks, investors can also sell ETFs short (betting that the price will fall) or purchase options (wagers that the ETF will be trading above or below a certain price on a future date), although these are more complex 🤷🏻♀️ instruments not available through Wealthyhood.
They’re also like stocks in that some ETFs are incredibly popular with investors, changing hands thousands of times a second, while some trade much less frequently.
That’s all for our first chapter on ETFs. In the next chapter, we’ll walk you through the different types of ETFs available. 🤓
Please remember that when you invest, your capital is at risk and you may get back less than you invested. This learning guide is for information purposes only and is not investment advice.
Invest your money with confidence
When you invest your capital is at risk.