The Basics of Investing in ETFS and Mutual Funds
An exchange traded fund is a kind of mutual investment fund and such an entity is traded on specific stock exchanges like the New York Stock Exchange or the NASDAQ stock exchange. Funds and ETFS are similar in many ways. For instance in an ETFS, one company’s shares will be included in the fund. As you can imagine, when these stocks increase in price, so too will the shares of the investor who invested in that fund.
When looking for an investment vehicle that can deliver good returns over a period of time, most investors look towards mutual funds and ETFS. A mutual fund is created by a manager who aims to increase the net asset value (NAV). The manager invests his money in various companies depending on the investments he anticipates to make during his term of office. The advantage of investing in mutual funds is that you know that the fund is being managed by a professional and that the manager has made a good analysis of the market conditions. With an ETFS, the same analysis is not possible because the ETFS only tracks the price movements of a particular index and therefore cannot make any recommendations concerning what should be done in terms of investing. However, even with that said, ETFS can be useful in determining whether the market conditions have been indicative of a buying or selling opportunity.
If you are looking for an investment vehicle that will help you obtain a steady income during periods when the market is bearish, then ETFs would be your best choice. ETFS help in identifying sectors that are expected to gain in value, hence diversifying your portfolio. Similarly, if you are looking for ways of boosting your portfolio return, then look towards ETFs and mutual funds. By investing in multiple types of assets, you can spread your risk amongst different entities thereby ensuring maximum diversification. Furthermore, by investing in ETFS and mutual funds you can be assured of a steady flow of income and can also diversify your portfolio.