If You Want To Be Rich, We Can Help You! | Features and Benefits of ETFs

Exchanged traded funds, also known as ETFs, has grown in popularity over the last decade.  There are specific functionalities of these financial instruments that make it a great addition to any diversified portfolio.

Professional Money Management

There are a lot of similarities between ETFs and mutual funds.  As you probably already know, mutual funds are investment vehicles that are run by professional money managers.  Every mutual fund has it’s own stock investment strategy and it’s varieties can be as broad as entire nations and as focused as market caps.  Of course, the main benefit is that an expert is picking your stocks for you.

In some cases the stocks that go into an ETF are picked by a computer.  These instances would be if an ETF follows a particular index like the S&P 500 or Russell 2000 indices.  This would also happen if an ETF is programmed with proprietary trading algorithms based on a particular investment approach.

No Management Fee

Probably one of most attractive features of ETFs is that it is relatively cheap compared to mutual funds.  Even no load mutual funds can be very expense depending on its expense ratio.  ETFs are traded on the open exchange just like any other stock. That means you only have to pay your usual trading commission to get an ETF.

Trade Flexibility

With ETFs, you get the benefits of mutual funds without some of it’s liabilities.  One advantage that you have over mutual funds is that you can trade ETFs at anytime during the trading day.  With mutual funds, you are allowed to invest or divest only once at the end of the day.

The great disadvantage to mutual funds is that if there is major breaking news that affects your fund, you can’t trade on it until the end of the day.  That might be too late to move on the news.  With ETFs, you can move immediately on any pertinent news.

Invest in Entire Sectors

Another benefit to ETFs is that you can invest in entire sectors without having to go out and find the individual stocks yourself.  For example, if you see that the gas industry has some potential for future growth, you could buy shares in any number of natural gas ETF funds that are available.  It will save you a ton of time searching for stocks in this sector.

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