Investing in ETFs

ETFs are exchange traded funds. They are securities that are made up of many different stocks. Usually each stock that comprises the ETF has something in common with the other stocks. As an example there may be an Solar Power ETF which owns nothing but solar company stocks.

ETFs come with some nice bonuses that you can't always get with mutual funds.

ETFs are purchased by individuals and can be bought and sold all day long with few restrictions and almost no minimums.

ETFs usually find a way to avoid taxable events. This is a significant advantage for an ETF over mutual funds. Exchange-traded funds allow an investor to control when the taxes will be paid on an investment, whereas in a traditional mutual fund those decisions are made by someone else.

The internal expenses of most Exchange-Traded Funds are very low. ETFs typically charge between .5 and 1%., lower than the typical mutual fund.

ETFs are not actively managed, therefore, YOU the investor and purchaser of the ETF can manage the risk when you decide to buy them. Position sizing is one important consideration with an ETF purchase to manage this particular risk.

Stop Loss orders: This is a tool you can employ to nail-down a floor beneath which the price of your ETF cannot fall. You arrange this with your broker or click a button if you are investing with an online brokerage. This protection is not available with a mutual fund.

Exchange-Traded Funds provide the diversification benefits of a mutual fund with the advantage of being traded like an individual stock. Whereas a mutual fund can only be bought or sold based on that day's closing price, Exchange-Traded Funds can be bought or sold anytime throughout the trading day. This allows you to more quickly enter or exit the market during the day.

Investing in ETFs is growing in popularity, as it can offer a competitive advantage over mutual fund investing. Learn the facts and take advantage.