Chapter 1 of 5 – By Manuel Tovar, October 01 – Hispanic Solutions Group
For some time now, exchange-traded funds (ETFs) have become popular in the last decade and now have millions of dollars in assets. ETFs allow investors to buy a collection of stocks or other assets in a single fund, usually at low expenses, and are traded on an exchange like stocks.
But with literally thousands of ETFs to choose from, where does an investor start? And with the stock market rising steadily, after an initial dip as part of the coronavirus crisis, so what are the best ETFs to buy? today we give you some suggestions
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How do ETFs work?
An exchange-traded fund is an investment fund that is listed on a stock exchange. ETFs hold positions in many different assets, including stocks, bonds, and sometimes commodities.
An ETF often tracks a specific index such as the Standard & Poor’s 500 or the Nasdaq 100, which means that it holds positions in the index companies with the same relative weight in the index.
So by buying a share in the ETF, an investor effectively buys a small stake in all of the assets that the fund has.
The performance of the ETF depends on the investments you own. If the investments work well, the price of the ETF will increase. If investments perform poorly, the price of the ETF will naturally fall.
To run an ETF, the fund company charges a small fee called an expense ratio. The expense ratio is the annual percentage of your total investment in the fund. For example, an ETF might charge a 0.12 percent fee. That means that, annually, an investor would pay $ 12 for every $ 10,000 invested in the fund. This low cost makes ETFs popular with investors.
The best ETFs for 2021
ETFs allow investors to focus on a specific market niche or even invest in the market as a whole. Below are some of the top ETFs by category, including some highly specialized funds.
This type of ETF can provide targeted exposure to publicly traded international companies in general or to more specific geographic areas, such as Asia, Europe, or emerging markets. Investing in foreign companies presents concerns such as currency risk and governance risks, as foreign countries may not offer investors the same protections as the United States.
This type of ETF offers investors a way to buy stocks in specific industries, such as consumer staples, energy, finance, healthcare, technology, and more. These ETFs are typically passive, which means they track a specific preset index of stocks and simply mechanically follow the index.
This type of ETF offers investors a way to buy only dividend-paying stocks. A dividend ETF is generally passively managed, which means that it mechanically tracks an index of companies that pay dividends. This type of ETF is typically more stable than a full market ETF and can be attractive to those seeking income-generating investments, such as retirees who are numerous.
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