What is an ETF Stock? How are ETF Stocks Different from Mutual Funds?

One of the best ways to keep your in something useful is delving into investments. Investments however come with a lot of risks that leaves so many investors with the difficulty of deciding on which exact stock to invest in. One other common wish of many investors is to be able to have a diversified portfolio by investing in various stocks and commodities at a time- but most people usually find investing in each commodity separately at the same time, quite risky and stressful. This is where the ETF Stock comes in! Have you come across the ETF Stock before? Would you love to know what it is about, where and how to get it? Hang in there! In this article, we shall be going through the full details of everything you need to know about ETF Stock.


1.      What is an ETF Stock?



Exchange-Traded Fund (ETF), also known as Stock Exchange-Traded Fund, is simply a type of investment fund that tracks the value of certain assets that can include stocks, currencies, and so on. Just like normal stocks operate, ETF Stocks are also traded on various exchanges and so can be bought at any time of the day. ETFs work by tracking stocks from either a particular company or a large index of stocks. One very good benefit of ETFs is the fact that they allow you to access a wide range of equities just by owning a stock- this gives you easy access to a diversified portfolio. ETFs are also relatively easier to trade when compared with some other stocks out there. Talking about the risk involved in investing in ETFs, every investment comes with its own particular and so ETFs are not exempted. However, ETF Stocks allows you limited risk exposure you get when you have a portfolio that is not diversified.


Investing in ETF Stocks comes with many benefits and the topmost of them is the fact that you get a diversified portfolio by getting access to a single stock that keep track of varieties of the commodity. This limits your risk of totally losing all your funds drastically. Another very awesome benefit of this stock is the fact that it is quite transparent. Apart from the fact that you can always track its price-performance online at any time, the fund’s holding declaration is done every day. You also get to enjoy the tax benefit of getting taxed only when selling your investment and not all through the period of the investment. Nothing comes without its disadvantage, one of the most common demerits of ETFs is the cost incurred on trading as various online brokers charge various commission fees. You can also find it quite difficult to sell out your ETF if it is the type that is not traded so often. Above all, ETF Stocks are great to invest in and so many investors are getting attracted to them as days go by.


2.      How to Buy ETF Stocks


Buying ETFs is very simple just like any other stock. You should consider your options before choosing which particular ETF Stock to go for and which brokerage platform to buy from. After you have weighed your risks, the first thing to do is to open a brokerage account.

To open your brokerage account, get available some important details like your full name, contact address, email address, and password. Once you have the account open, you would have to transfer funds into your brokerage account- which will require you to provide your bank details. Once you have your funded brokerage account, go ahead to search for the particular ETF Stock you intend to buy by using the search button, type in the amount of stock you want to buy once it pops up, make sure you double-check for any errors and finally click on the buy button- and there you go! The only thing you have left to do is to sit back and watch how your stock performs.


3.      Types of ETFs Available For You



There are various kinds of ETFs out there available for you to choose from. Before opting for a particular one, be sure to go through all details and weigh its pros and cons to be sure that it best suits your taste and pocket at that time. Here are five types of ETFs you can choose from:

3.1 Stock ETFs

This is a long-term investment and it consists of stocks mainly. Stock ETFs are presently winning in the market as lots of investors seem attracted to them. This is probably because though investing in Stock ETFs comes with its risks, it has a reasonably low risk involved when compared with investing in individual stocks.

3.2 Bond ETFs

The main thing that investors use Bond ETFs for is to generate steady cash payments. One very interesting thing about Bond ETFs is the fact that they do not come with a maturity date, unlike individual bonds. It is another great, low-risk investment, just like the Stock ETFs. The payments that investors generate using Bond ETFs come from the generated income by the separate bonds in the fund.

3,3 Commodity ETFs

You can understand this type of ETF as being able to get various commodity shares all in one single investment. Commodities are simple any form of goods that are bought or sold; they could be metals, gold, agricultural products and others. This seems very interesting as you get to hold various commodity items in a single investment. This is another well sought after kind of ETF Stock investment as it affords you access to diverse commodities in one entity. You should however be sure to weigh all your options and do adequate research before jumping at any Commodity ETF, be sure that you are satisfied with the performance of the company and that the IRS sees the commodity as a collectable. This will allow you access to weigh the various risk levels involved and also the tax implications present in investing in it.

3.4 Sector ETFs

This involves investing in companies that are within various sectors of the stock market- it could be financial, industrial, health care, and others. This gives investors to track the performance of each sector to know which of them is performing better than the other. This type of investment comes with a high amount of risk but it gives your portfolio a reasonable level of exposure to diversities.

3.5 International ETFs

Investing in foreign stocks is another common way different investors adopt to have a well-diversified portfolio. One way of safely buying these foreign stocks is to opt for international ETFs. It could either be investing in ETFs from various countries or a single foreign country. Generally, investing in International ETFs is very easy and they carry a reasonably low amount of risk.


4.      How are ETFs Different from Mutual Fund



ETF Stocks and Mutual Funds have a lot of similarities when it comes to investing in them but there are some certain differences like the fees. Many investors seem to opt for ETFs because they come with lower fees when compared with mutual funds. While ETF Stocks allows its investors to acquire various stocks in one single security, all at once, mutual funds allow its investors to get their money together and then invest in various stocks. Another difference is the fact that ETFs, just like other stocks, are traded on exchange platforms, while mutual funds are bought from the company issuing the shares directly. Finally, as long as the stock market is open, ETFs can be traded and the prices are always fluctuating unlike Mutual funds that are only priced a single time in a day and this is based on their net asset value.


5.      Conclusion

ETF Stock is currently catching the eyes of so many investors today and this is mostly because asid from that it is quite easy, it affords investors access to a diverse portfolio by being able to track various assets all in one single stock. ETFs also come with quite low fees and they can be traded on various exchange platforms at any time of the day. Like any other investment, we recommend that you carefully do your research, and then go ahead to weigh your risks when deciding whether to invest in an ETF Stock or not. There are various ETFs available to buy from various brokerage platforms as well, be sure that you go for the options that best suit your taste and pocket at the time of investing. You can check out the above-discussed types of ETFs and go for the one that best catches your attention while carefully following the steps on how to buy ETF stocks discussed above. Generally speaking, you are likely not going to regret investing in ETF Stocks, especially if you are an investor that is good in risk management and values having a well-diversified portfolio.