In this lesson you will learn 💸
- What an ETF is
- What differentiates single stocks, index funds and ETFs
What are funds?
A fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments and other assets.
Mutual funds are operated by professional money managers, who allocate the fund’s assets and attempt to produce capital gains or income for the fund’s investors. They might not be traded on the stock exchange, but trade once a day through the fund manager.
An exchange-traded fund (ETF) is a type of pooled investment security. Typically, ETFs will track a particular index, sector, commodity, or other asset. ETFs can be purchased or sold on a stock exchange the same way that a regular stock can.
Benefits and risks of ETFs
ETFs are a great way for you to invest diverse and partially guided.
Main benefits include:
- Direct and individual choice
- Oftentimes more economic that special advisors
- Fund structure guarantees diversification
Main risks include:
- Choosing the 'right' ETF for you
- Less influence through shareholder rights
- Costs per trade matter
- Can be time consuming and you might have to rebalance