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The Rise of ETFs

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ETFs are very popular and some investors use them for day trading. And ETF is abbreviated for Exchange Traded Fund. Similar to Index funds, it’s a diversified collection of assets that trade on an exchange (like a common stock). ETFs were made to simplify investing- giving the option to invest in a fund instead of choosing multiple common stocks. There are managers behind the scenes doing the trading for you. These funds are great for investors. They are tax-efficient, low cost, and have high volatility.

A Wolf in Sheep’s Clothing

But comparing ETFs from TIFs (traditional index funds), ETFs have given the name for “a wolf in sheep’s clothing” due to the aggressive volatility. They were made to hold, not trade (short-term for 5 years, unlike TIFs for 10+ years). However, there are many kinds of flexible ETFs and it’s up to the investor to make her/his decision on what is right for their portfolio. They are heavily diversified, affordable and an if used wisely, an appropriate investment for the novice investor.

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