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Your Portfolio Power with ETFs

Your Portfolio Power with ETFs

Your Portfolio Power with ETFs

 

Exchange Traded Funds (ETFs) are a great way to play the market as a whole, a specific industry, or an index. They trade like stocks as their price fluctuates each day, experiencing price changes throughout the day so its value isn’t calculated like a mutual fund. To top it off, buying them is as easy as making a stock trade online. Let’s explore.

ETFs Broken Down

An Exchange Traded Fund (ETF) is simply a security that tracks an index, group of stocks, commodity, etc. but is traded like a stock on a stock exchange. The first big point to note is that an ETF is NOT a mutual fund because ETFs prices change throughout the day just like a stock.

Let’s say that you are bullish on internet stocks like Amazon (AMZN), Yahoo (YHOO), Time Warner (TWX), and Ebay (EBAY). Well we know that if we only have several thousand dollars to spend it will be very tough to buy relative positions in these companies. But with ETFs we could simply buy an ETF like the Internet HOLDRs (HHH) which holds positions in all of these companies and more. We buy HHH like a stock, it trades like a stock, and in reality, we are holding a securities that simply tracks a group of stocks.

Index Funds

The most popular ETFs are the index funds. Want to invest in the NASDAQ, then buy a position in what is called the Qs, or ETF QQQQ. There are also ETFs that track the S & P 500 which is the SPY, and the Dow Jones Industrials has the DIA. Bottom line here is that really every index has an ETF.

Other ETFs

ETFs can be used to get yourself invested in anything, anywhere, for example:

  • Energy – XLE
  • Oil Services – OIH
  • Oil – USO
  • Technology – XLK
  • Semiconductors – SMH
  • Financials – XLF
  • REITs – VNQ
  • US Real Estate – IYR
  • Malaysia – EWM
  • Emerging Markets – EEM
  • Silver – SLV
  • Gold – GLD