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How to invest in an ETF

By Edited Oct 25, 2015 0 0

ETF stands for Exchange-traded funds. These types of investments can represent shares in hundreds of ETFs can represent shares in hundreds of different companies and can be traded at any point during the regular market hours. These types of investments are popular among conservative investors but require a unique approach.

Things You Will Need

pen and paper

Step 1

Choose the right broker. ETF trades have fees just like any other investment, it's important to evaluate a company's value and cost. Some companies offer great investment advice but have larger than normal fees, while other have very low fees and bad advice. It's important to read independent reviews of each company before committing.

Step 2

Decide when to buy, sell and hold. ETF's are a tricky investment for a number of reasons. You have to decide to automatically sell your ETF's if they drop in value. This method is a lot easier and more widely used. Most ETF investors use this method so they won't lose as much in the short-term.

Step 3

Decide what number of ETF's to buy. This is something you and your broker will have to consider. Keep in mind, the larger investments typically make more money because the fee stays the same. Investing in a large number of ETF's will require higher fees.

Step 4

Diversify your ETF investments. Like any other investment, it's important to diversify and hedge against risky investments. You can invest in different areas like industry so you can minimize your losses in certain areas. You and your broker will have to discuss what ETF's to diversify with. The rule of thumb is to never invest more than 10 percent in any one area.

Step 5

Study each investment independently. ETF's can drop in value very quickly, so it's important to always look over the company's track record before investing. You can get your broker to investigate each ETF before you fully commit.

Step 6

Join ETF discussion groups. Groups like this discuss long-term strategy and different investment strategies. It's important to follow the approach of successful investors. These groups are great because you can discuss individual trades while also discussing different approaches to ETF investing.


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