Unknown assets that don’t stop growing
Exchange-traded index funds or ETFs (Exchange traded funds) were introduced by Vanguard in 1975. Since then, they have experienced an unstoppable growth, especially in the last 10 years. Nowadays, over $ 2 trillion assets are managed via ETFs, surpassing mutual funds.
However, they are mainly unknown among small savers and investors. ETFs can be introduced as a basket of assets that faithfully follow a determined index or sector. We can find multiple ETFs that follow specific indexes regarding the importance of the American market, such as S&P 500 or the NASDAQ. There can be particular ETFs that follow a sector, as well. ETFs have lower fees than index funds and even lower fees than mutual funds. Not only that, they can be contracted more freely.
The 5 main advantages of ETFs
Low commissions
ETFs have lower commissions than index funds and even lower commissions than mutual funds. The fact that this type of assets doesn’t require managers or expensive research makes low commissions possible.
Extremely efficient
It is very difficult for a mutual fund to overcome ETFs’ efficiency because this type of asset replicates 100% the benchmark that they follow (except for minimum expenses). Low costs highlight mutual funds’ inefficiency. Most mutual funds are not capable of making consistent returns according to the benchmark that they follow.
Total liquidity
ETFs trade like any other stock. They can be bought and sold during the day.In addition, an ETF is listed as any other stock we can buy them from very low amounts, ie the minimum is the proper value of the ETF in the market.
Transparency
Generally, ETFs follow indexes known in advance so any investor can know what they contain. In contrast, mutual funds only reveal their position after a long period of time.
Availability
As they are traded like any other share they can be found in any bank or online service. But above all and most importantly, ETFs offer, is so wide that we can access all the “corners” of the market and design almost any investment strategy that comes to mind.
Where to invest, Inbestme’s Scope
Even they are not much promoted by traditional financial services, ETFs remain mainly unknown among small savers and investors. There are multiple ETF options and usually more than one supplier for each index or sector. Investors have a wide range of ETFs so they can pick the index or sector they desire and rest assured they are going to be able to replicate the performance with a minimum cost.
Even if traditional financial services do not promote them, ETFs are clearly an excellent tool to create efficient diversified portfolios like the one we offer. You can build yourself your first portfolio.
If you want to investigate for yourself, these links may help you find the ETFs that suit you the best:
In Europe or here.
In USA
If you prefer, you can invest with us. Just answer a short questionnaire and we take care of the rest. In the meantime, ask yourself why traditional services don’t promote ETFs.
