How do you grow your money? Investing in exchange-traded funds (ETFs) can be an effective way to do just that, especially if you’re looking to invest long-term and not just trying to get rich quick. Here are five reasons why you should consider ETFs as part of your investment strategy. They offer lower costs, diversification, liquidity, efficiency, and tax benefits over traditional investing vehicles.
1) Easy Access
The first reason why you should invest in ETFs is because they’re so easy to access. In fact, it’s as simple as making a stock trade at your local brokerage or online trading account. It takes just a few clicks to buy and sell ETF shares, which makes them a great option for investors of all levels. Even if you have no investing experience, you can use ETF trading to give yourself some real-world experience that will help you later on down the road.
2) Low Risk
There are no guarantees with investing, but one thing’s for sure: The stock market can be an unpredictable place. If you want to grow your money, or money you don’t have to worry about losing, consider investing in an exchange-traded fund (ETF). This financial instrument will allow you to buy a piece of everything on a stock market index. While most ETFs are relatively safe options, if the underlying securities go belly up, so will your investment.
3) Low Cost
Buying an individual stock comes with added fees, like broker commissions, that can really cut into profits. When you’re investing for retirement, every dollar counts—which is why purchasing low-cost exchange-traded funds (ETFs) is a smart choice. By pooling hundreds of stocks together, you get more bang for your buck. As each share of an ETF only costs a fraction as compared to ten times or more per share on stocks you buy individually.
4) Wide Selection
irst, if you’re looking to invest in index funds or exchange-traded funds (ETFs), there are more than 3,500 of them available for purchase. And they cover virtually every corner of industry and economic sector. This means you can find an ETF that perfectly matches your investment strategy. Plus, many come with low expense ratios, so your money will grow faster than investing in individual stocks would allow. It makes sense to put all of your eggs into one basket when picking a stock; but when it comes to ETFs, don’t be afraid to diversify—which is why there are 1,800+ index funds and 2,200+ ETFs on average for each U.S.-listed stock on major exchanges.
5) Passive Fund Management
One of my favorite parts about investing in index funds is that you don’t have to do anything. Essentially, you’re putting your money into a professionally managed index fund and letting a portfolio manager handle all your decisions—as well as a team of accountants, analysts, and risk managers—all at an extremely low cost. Moreover, there are no commissions for setting up or taking down an investment portfolio. It doesn’t get much more passive than that!