ETF Investing

ETF investing is a relatively new way for individuals and institutions interested in investing shares to diversify their portfolios. ETF's were first introduced back in the early 1990's.

ETF means exchange traded funds. ETF's are effectively a trading instrument based on a particular sector of the stock market. There are many different sectors of the stock exchange. For example there are financial stocks, media stocks, oil stocks, resources like gold and silver, electronic sector stocks, computer stocks, transport, industrial and real estate to name some of the different sectors. There are also ETF's based on currencies, different countries share markets and share market indices. There is a wide range of ETF's to invest in.

There has been an exponential growth in ETF investing for a number of reasons.

The advantages of ETF investing are that you can diversify your portfolio, you can trade in many different markets around the world and the fees to trade in ETF's are generally less than trading in traditional shares.

Instead of investing in an individual stock you base your investment decision on the theory that the investment sector has a much greater probaility of being more stable than any one individual stock within that sector.

Gold has been regarded as a safe haven for investors whenever the stock markets have had a major correction, fall, crash, call it what you like when the price of investing shares has fallen. 2% for some in the media is seen as a fall, 10% is seen as a crash and beyond 10%, that is doom and gloom, recession, depression, those possibilities are just weeks or months away. Usually though the markets rise again after any fall.

Stock market falls, crashes, corrections are what most share investors want to avoid. Astute professional stock market traders make money whatever the market conditions, that is whether it is a bull or a bear market.

ETF investing is a great way for stock market investors and traders to make money no matter what the economic or business mood is. There are ETF's that work in an inverse way. That is as the market, or individual market sector is falling the ETF value is rising. This means that if you believe that a sector or the whole market in general is about to fall you can invest in the ETF's that work contrary to the market index that they are based on.

There are four main types of EFT's. These are Index EFT's, Sector EFT,s, Leveraged EFT's and Inverse EFT's. We have touched on some of the characteristics previously.

EFT investing based on stock market indices and different sectors are the most common and least risky. Inverse EFT investing is not so common or widely known about but it can be very profitable.

Leveraged ETF investing is for those who are more risk takers because when you borrow to invest you can lose a lot more than if you only invest the cash on hand. Equally you can make a lot more with leverage. It becomes a personal choice to invest in leveraged EFT's or not.

There are risks associated with EFT investing. Not all EFT's are the same. You can have a number of EFT's based on the same sector or indice but are not the same. This may not be apparent initially but you may discover that one EFT is based on 20 stocks in a sector wheras another is based only on 15 stocks. Or if they have the same number of stocks in the EFT they are weighted in different percentages. You do need to analyse the EFT's before investing in them.

ETF investing is growing and one reason is that Mutual Funds have not been performing well in recent years. Approximately 70% of Mutual Funds do not beat the Standard & Poors 500 benchmark over a five year period. Many individual investors are now trading themselves. They are thinking "Why should I pay a money manager to invest my money and he or she cannot beat the basic benchmark the S&P 500.

EFT investing makes sense when you know that statistic. Simply withdraw your money from the Mutual Funds and invest your money in an EFT that matches the S&P 500.

Alternatively you may want to look at a financial platform that can help you earn a passive income with only 15 minutes of work each week after an initial learning curve in how to use the platform.

ProphetMax is the name of this platform where you will discover how to invest using ETFs, the physcology of trading ETFs, how to set your financial goals to achieve a realistic passive income and a whole lot more. Believe me ProphetMax is worth your time to check it out and do your due diligence.