What is an ETF?
An ETF is an Exchange Traded Fund. With everything in investing, simply break up the word to simplify this for yourself:
ETFs are simply a FUND (basket of shares or bonds or commodities) TRADED (willing buyer willing seller) on an EXCHANGE (stock market).
Example: If you buy the NASDAQ 100, you buy a piece of the top 100 companies listed on the NASDAQ. This lowers your risk, as some companies will move up and some move down. They won’t all move in the same direction all the time.
There are various ETF providers. Do not duplicate ETFs. Also, try not to buy single stocks that are heavily weighted in your ETFs. The ETFs below all track the S&P 500. The only difference is the providers; Sygnia, Satrix, Coreshares, 1Invest.
You need to research and compare ETFs. Every ETF has something called a Minimum Disclosure Document (MDD).
Do not invest until you have scrutinized the MDD. You can Google any ETF name and add the words “Minimum Disclosure Document. Your search will return a PDF document. That is the MDD. Look at the following in the document:
- Fees (Total Expense Ratio or Total Investment Cost). Fees matter. If I see 2 ETFs and they track the same thing, I am choosing the cheaper one every single time.
- Look at what the ETF tracks (underlying companies).
- The risk profile must align with your risk profile.
- Dividend or Total Return. History has a way of repeating itself.
Why do investors opt for ETFs?
- Lower fees than buying single stocks
- Lower risk. Because you are buying a basket of items, you spread your risk
- This simply means they are very easy to buy and to sell
If you invest on EasyEquities, use this very useful tool to compare ETFs:
For USD ETFs use: