Day 22 - ETF - Just Buy the Haystack

More than USD 12,000,000,0000 are invested globally via ETFs as of 2022, which will likely cross 25 trillion by 2027.

ExchangeTraded Funds(ETF) have become a popular medium for investors in the last decade due to the following reasons;

  • Ease of access and use
  • They offer a wide range of investment possibilities
  • They are highly liquid
  • Low Cost
  • Instant transactions at market price
  • Allows automation of buying and selling through limit orders

What is an ETF?

An ETF or an Exchange Traded Fund is also a pool of funds created for investing in different assets. However, an ETF is actively traded like a stock on an exchange, unlike a Mutual fund. They aim to provide the flexibility of a stock and the diversification like a Mutual Fund.

There are more than 8500 ETFs worldwide, providing an investment opportunity in a wide range of asset classes like;

Stocks, Bonds, Real Estate, Commodities, etc

There are also advanced ETFs like Inverse ETFs, Leveraged ETFs, and Alternative investment ETFs

What are the Types of ETFs?

ETFs are typically index tracking or passive. They are ideal if you don't want to or cannot pick the right stocks for investing.

“Don't look for the needle in the haystack. Just buy the haystack!”― John C. Bogle.

However, there are also actively managed ETFs. Fr Eg: ARK Innovation ETF

Which are the Top 5 ETF companies worldwide?

  1. iShares - 384 ETFs in the U.S. with an AUM of $2,336.85B
  2. Vanguard - 81 ETFs in the U.S. with an AUM of $2,007.51B
  3. State Street SPDR - 141 ETFs in the U.S. with an AUM of $1,037.38B
  4. Invesco
  5. Charles Schwab

Which are the Top 10 ETFs worldwide?

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How to select the suitable ETF to invest?

With more than 8500 ETFs worldwide providing access to a wide range of investment options, the choice can certainly be overwhelming.

Identifying your financial goals and mapping your investments to the goals in terms of risk appetite and investment horizon is crucial.

If you are a beginner, it is better to stick with a diversified portfolio of ETFs, Mutual Funds, Cash, and endowment plans.

However, if you are a seasoned investor, you can access a diverse range of assets in different geographies.

Knowing about ETFs was the task for Day 22 of the WIN With Money Challenge.

See you tomorrow to discuss the basics of Bonds.

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