What are Exchange-Traded Funds – ETFs Today we will talk about an interesting financial instrument such as ETF.
ETF stands for Exchange-Traded Fund. ETFs are made up of a set of assets that are compiled according to certain characteristics and traded on an exchange in the form of shares.
As a rule, ETFs clearly copy the composition of certain indexes. That is, when you buy an ETF, you are buying a portfolio of multiple assets, which can include indices for stocks, bonds, commodities, currencies, countries, individual industries, the global market, and any other assets.
Benefits of ETFs:
- Wide diversification. When you buy one share of a fund, you essentially get a ready-made diversified portfolio
- Substantial savings in time and money. There is no need for a lengthy selection of securities for the portfolio.
- Low cost of one lot. As a rule, the cost of one ETF is several times lower than any individual security included in the fund.
- Savings on brokerage commission fees. When you purchase one share, you pay a commission fee only once, and if you compile an index on our own, you will have to pay for each security separately.
- High liquidity. You can quickly buy or sell your securities.
All in all, an ETF is a great way to start investing in the stock market with little capital and is a simple and straightforward way to diversify your investment portfolio.
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