Exchange Traded Fund (ETF) - Another Guaranteed Investment Return

Exchange Traded Fund (ETF)
Another Guaranteed Investment Return

Exchange Traded Fund
Wall Street's Latest Financial Instrument
Buying Exchange Traded Fund (ETF) is more or less like mutual fund investing. You don't have to analyze which stock worth investing anymore!

So what is ETF?
And, how it works?

You must have heard there are various market indexes in stock exchange; S&P500 and DJIA being the most popular index in the planet.

And ETF has a lot to do with those indexes.

If index fund (for mutual fund investing) is about buying stocks listed in the market index, ETF investing is when you buy the index itself. Yes, you buy the whole S&P500 listed companies! Thus, you don't have to pay for mutual fund commission anymore!

However, your investment value is equal to the latest market index tracking; just like when you invest in stocks. Let say you buy S&P500 index for $1,000 when the market index is at 1000 point, your investment value will grow to $1,500 if the index's point increases to 1500.

Why Exchange Traded Fund is so Popular?

Everyone knew that despite the short term price volatility, stock market will increase in the long run. In fact, the value increases with compounded effect. For example, S&P500 index had grew by 12 per cent per year for EVERY SINGLE YEAR for the past 50 years.

That means, 12 per cent compounded return for 50 years!

Just imagine if your dad invested $10,000 in S&P500 index for you from the day you were born, you will retire with $2.9 million cash in hand! Moreover, the return is almost risk free! Isn't that a fool-proof stock investing strategy?

That's why I wonder why people didn't manage to make any money from stock market.

If you still think that investing in stock is risky, think again. There are high-return and low-risk stock investing strategies out there waiting for you to discover their potentials.

How to Buy Exchange Traded Fund?

There are two obvious ways to make money from ETF,

Firstly, Buy ETF through brokers: ETF can be treated like any other stocks. However, its name is vary from its original index. For example, ETF that tracks DJIA index is known as Diamond (Ticker Symbol: DIA) and the one that tracks S&P500 is called Stand & Poors Depository Receipts (Ticker Symbol: SPY). Therefore, you can buy the index through your broker.

Nevertheless, choose stock brokerage firm that suit your needs.

Secondly, Buy No-Load Index Mutual Fund: A no-load fund is mutual fund that does not charge commissions; Vanguard funds for example. Of course it is different from buying ETF directly but you can reap the benefits of investing in all stocks listed in the index with no commission charged.

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Exchange Traded Fund (ETF)Another Guaranteed Investment Return