All About ETF Investing for Financial Freedom
ETF investing is a niche of investing that’s good for long-term investors, and those new to investing who are happy to let someone else do the legwork of picking top stocks in a given sector.
An ETF, or exchange traded fund, is a collection of securities that track an index or industry. These securities can be made up of stocks, bonds, commodities, or a mix. ETFs are traded on an exchange and the price can fluctuate throughout the trading day, just like stocks.
When you are ETF investing, you’ll pick an ETF which holds a number of different stocks, usually in one sector. For example, if you wanted to invest in the healthcare sector, you might invest in something like the iShares Global Healthcare ETF (IXJ), which tracks the performance of several well-known companies in the healthcare sector, including Johnson & Johnson (JNJ), Bristol Myers Squibb (BMY), Abbott Laboratories (ABT), Pfizer (PFE) and others.
Many ETF investors strive to create a diversified portfolio so they can lower their risk potential while creating a better chance for higher returns or ETF dividends over long periods of time. Investing in the right ETFs helps build a diversified portfolio easily, without the risk of investing in and managing a bunch of individual stocks.
It’s for that reason that ETF investing can also be cost-effective. The cost of an ETF is always less than if an investor bought all of the same stocks individually. Fewer transactions means few commissions that need to be paid to a stock broker for each trade. Also traditional ETFs have a lower expense rate because they track an index, making it a less time-intensive investment.
To learn more about ETF investing, read our articles covering every angle of this topic below. You should also download 5 Tips for Successful Investing for FREE to help you reach your goals. If you enjoy what you learn and would like to join our community of like-minded people like yourself who are planning their financial freedom, I recommend joining the Financial Freedom Federation Gold Club.