Random Thoughts & ETFs

Random Thoughts

Recently we have seen the market taking a pretty brutal beating, scaring people away, and investors pulling out. Let me remind you, fear does not create wealth, confidence does.

Do not let this market scare you away from investing.

The sooner you start investing and saving for your future, the better your financial stability will be for the future. You will be better off than the guy who spent his money on various vacations, cool technology, and expensive useless materialistic things. Even though we all want those, sometimes saving instead of buying those would be a better option.

For those of you who read these blogs, you will have the edge over someone who doesn't read them once the posts start getting more in depth. You will have more knowledge than those who decide to skip over the posts, the choice is yours. Free information is the best information, utilize it. I realize you could just pick up a book and read about this stuff, probably learn more, and it will be more in depth, but I want to help get simple points across and give you different point-of-views on things so you can analyze things. 

Today I want to talk about what an ETF is, or an exchange traded fund, are one of my favorites. An ETF is basically a security that tracks indexes, commodities, bonds, or a handful of assets like the index funds.

Are these like mutual funds? Sort of. ETFs trade like the common stock, they experience changes in price just like stocks, and you can buy and sell them throughout the day. They tend to have higher liquidity and lower, to almost no fees than mutual funds do. The low commission fees make ETFs way more interesting to investors than mutual funds. Some brokerages have commission free ETFs, some you may have to pay.

The ETFs own assets, for instance, the ETF $IBB or iShares Nasdaq Biotechnology (which in fact I do own) has holdings or assets. Some of which include, Celgene Corporation, Biogen Inc. Amgen Inc. Gilead Sciences, Inc. and Alexion Pharmaceuticals, Inc. Yes this is healthcare, personally I do like to invest in healthcare because everyone will always need healthcare. 

Shareholders of an ETF are entitled to profits, interest or dividends paid.

What are advantages of incorporating an ETF into your portfolio? 

1. Diversification, obviously.
2. Little to no commission fee with ETFs.
3. If you do not know which company to individually invest in, buying an ETF of the sector could help.
4. Easy to trade, traded on the stock exchange. 

Remember, the sooner you start, the better off you will feel financially, plus who doesn't like watching their money grow?

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Chris Barto