An exchange traded fund is essentially a group of securities (stocks) that are bought and sold on the stock markets by investors who want to increase their overall portfolio income. An ETF is an example of an equity index that tracks the performance of major corporations. Funds and ETFS are designed to track an array of different financial products including currencies, mutual funds, bonds and more.

Funds and ETFS

Investors can use ETFs and funds to diversify their portfolio which gives them greater control over their investments. By placing funds into an ETF, or mutual fund, investors can now have more than one asset class to manage. The cost of these types of products are relatively low compared to actively managed index funds, and can give you a great return on your investment dollars if you know how to invest. When you invest in actively managed funds and ETFs, you are trading one stock or security per day. This means that you have to be very careful with the stocks you select, because the risk of these types of products is very high. When you diversify your portfolio by placing funds in an ETF or mutual fund, you are only buying and selling stocks or securities that are related to the index or product that you chose.

Investing in ETFs and mutual funds allow you to have multiple layers of security included in your portfolio, ensuring that your portfolio is even, and extremely liquid. If you are just starting out with investing in ETFs or mutual funds, it is recommended that you choose the right ones for your specific needs. It is always a good idea to talk with a qualified investment advisor, or a financial professional that can help you find the right type of product for your portfolio.