Investing in ETFs

ETFs provide a great way for investors to diversify along with not having to pay those huge mutual fund fees.  Here are some reasons why ETFs might be for you.

1.       They give you a great way to diversify

ETFs track certain industry groups or markets.  So if you buy the ETF for a specific industry group and 1 company from that industry group goes under it is not going to affect you too much because you are invested in the sector as a whole.

2.       Most Mutual Funds do not beat the market

Almost every mutual fund ever created performs worse than the overall market in the long term.  So what can you do about this?  Well how about buying the market.  The SPY ETF tracks the S&P 500 which historically has gone up 10% a year if you were holding it for the long term.  If you are willing to bet that trend will keep going it might be for you.

3.       ETFs have low fees

Yes ETFs have fees, which make them less appetizing then normal stocks. But unlike mutual funds those fees are very small compared to the initial investment because they do not need to hire so many people to manage your money.

4.       EFTs have options

If I look at a stock I want to hold for the long term I always look to see if it is offering options on it.  When the markets start to fall it takes everything with it.  If I was in a stock without options I would have to sit and watch the stock fall. 

If I am invested in a stock that offers options I can always sell calls on the stock and bring in some premium while the markets are falling.  This way I can bring in a monthly income and offset at least some of the loss.