Investing For Beginners – What is an ETF Fund and Should I Invest in Them

When someone gets involved with investing for the first time, it can be confusing to keep all of the new terms straight. In addition, it can be intimidating to try to analyze and pick stocks for a successful portfolio. If someone has these concerns but still wants to get started with investing for beginners, they should consider an ETF fund.

The acronym ETF stands for exchange traded fund, which is similar to a mutual fund but has many more benefits. An ETF fund includes a basket of stocks that reflect a specific index. However, unlike more complicated mutual funds, it can be traded just like any other company’s stocks. In addition, the price of an ETF changes throughout the day, unlike a mutual fund which has a net asset value calculated at the end of each day.

One of the major benefits of an ETF fund for a beginner is that they are very easy to understand. If someone knows what industry they want to invest in but has trouble choosing specific stocks, an ETF is a great way to go. It is also useful if someone wants to emulate the ROI of a particular index.

When someone begins trading, they might not have a lot of money to spend on their investments, but ETF funds are very cost effective. An index requires multiple transactions per trade, where an ETF only requires one transaction per trade. This means that an ETF requires lower commissions than other options. They also have no load fees and lower managing fees than mutual funds.

Another reason that an ETF fund can help someone save money is that they are very tax friendly. Capital gains are taxed immediately when gain is realized in a mutual fund. With an ETF fund, the capital gains are not realized until the entire fund is sold. This means that someone who invests in an ETF fund saves more money over time on taxes from their investments.

When someone is first learning about investing for beginners, they should get as much information as they can about exchange traded funds. This method of investing is very easy to understand for new investors and costs them less over time in commission, managing fees and taxes. They also make it easy to find investments for someone who is not used to analyzing and choosing the correct stocks. If someone is just getting into the world of investing, ETF funds are a great place to start.

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