Learn to build a perfect portfolio by investing in ETFs.
Money Girl
239 MG How to Make Money with Exchange-Traded Funds (ETFs)
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Whether you're an experienced investor or a total newbie, exchange traded funds or ETFs are a great way to build your investment portfolio. I'll explain what ETFs are, why they're a smart investment and the best places to buy them. Before we get started, I have a quick announcement. I want you to join me for a free upcoming class that I'm going to be teaching by webinar called How to Get Started Investing, Five Things You Should Do With Your Money Now. You'll learn exactly how to build wealth without exposing your money to too much risk, plus a set it and forget it method I use that automates all the important stuff, so you don't have to be an investing genius to be successful. To register and get all the details, visit smartmoves2growrich.com. There are a limited number of participants that I can have on the webinar, so be sure to grab your free spot at smartmoves2growrich.com. Exchange traded funds are like the electric car of the investing world. They look like a regular car, but have some cutting edge technology going on under the hood. Let me explain. On the surface, an ETF looks like an old-fashioned mutual fund, both pool money to buy a variety of underlying investments, like stocks, bonds, real estate, commodities, currencies, or other assets. But unlike a mutual fund, an ETF trades on an exchange just like a stock, where you can track its price and buy or sell it at any time the market is open. With a mutual fund, you can only buy or sell shares from a fund family, and the price is calculated just once a day after the markets have closed. So, how do ETFs benefit investors? I'll cover five reasons you should use ETFs to create a perfect portfolio. Okay, now let's talk about five benefits you get from owning ETFs. Number one, low fees. If you like the idea of paying fewer fees and keeping more of your hard-earned money in your investment portfolio, exchange traded funds are the way to go. They have low operating expenses when compared to the average mutual fund, because the vast majority of ETFs are managed passively. That means their objective is to match a particular index, like the Dow Jones or S&P 500. To get the job done, they don't need to buy and sell investments frequently, pay transaction costs, or hire a large staff. Those savings get passed along to investors. This is different from actively managed mutual funds that aim to beat the market with various investing strategies and have to pay management for ongoing research and shell out for transaction costs. In addition to saving you money and fees, passive funds beat actively managed ones over time. The second benefit of owning an ETF is diversification. Smart investing is all about being diversified or spreading your money out into a variety of investments, so you reduce risk and increase returns. For instance, having $10,000 invested in 1,000 different stocks is better than having the entire amount invested in just one stock, but that's difficult, time-consuming, and cost-prohibitive for the average investor. ETFs come to the rescue because they cover every major index, market sector, industry, and region of the world, allowing you to have affordable and convenient diversification. 3. Ascent Allocation Studies show that how you allocate your money among major types of assets, such as stocks, bonds, and cash is what really matters. Stocks have historically outperformed all other asset classes, even though they're more volatile. That's why young investors should allocate a higher percentage of their portfolio to stock funds. In Colorado, our freedoms are everything. Gabe Evans would rip them away. Just like Lauren Bobert, he'd ban abortion without exceptions for rape or incest, and overturn the right to marry for same-sex couples. Don't let him take our freedoms. Paid for by DCCC, www.dccc.org, not authorized by any candidate or candidate's committee. After investing billions to light up our network, T-Mobile is America's largest 5G network. Plus, right now, you can switch, keep your phone, and we'll pay it off up to $800. See how you can save on every plan versus Verizon AT&T at tmobile.com/keepandswitch. Up to four lines via virtual prepaid card, a left 15 days qualifying unlocked device credit, service, boarded 90 plus days with device ineligible carrier and timely redemption required. Card has no cash access and expires in six months. I love learning, and anything that makes learning easier. If you're a parent and your child needs some homework help, then Ixcel is a right for your family. Ixcel is an online learning program for kids covering math, language arts, science, and social studies. Ixcel has interactive practice problems for topics from pre-K to 12th grade, and everything is organized by grade and subject. 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Number four, tax efficiency. ETFs can minimize your taxes because, as I mentioned, trading occurs on an exchange. With mutual funds, buying and selling can actually trigger taxable capital gains distributions for all the fund shareholders. That's because the fund family is a middleman. ETFs generally protect you from events that could unnecessarily raise your tax bill. To learn more about how mutual funds tax shareholders, listen to an older podcast called Can You Lose When You Gain, which is episode number 99. Number five, transparency. With ETFs, you know the exact companies or assets you own because that information is available on a daily basis. With mutual funds, many reveal their portfolio holdings two times a year only. So ETFs never leave you guessing about where your money is exactly. If you're ready to start investing in exchange traded funds, visit a few of the most popular ETF families at sites like ixl.com and powershares.com to learn more. You can also get some direction from personal finance magazines like Money or Kiplinger's, which usually include top ETF picks. Since you buy ETFs through a brokerage firm, one important thing to keep in mind is that each trade may incur a commission, just like when you buy shares of stock. Though that's a disadvantage of ETFs, a growing number of brokerages offer low cost or free ETF trades. Check out some great brokerage options like betterment.com/moneygirlvanguard.com and Schwab.com. Benefit administrators in the workplace are starting to see the light when it comes to owning ETFs. If your 401K doesn't offer them, speak up and let the benefits department know that you'd like the option to invest in low cost ETFs to build your retirement nest egg as quickly as possible. Remember to grab your seat in my upcoming free virtual class called "How to Get Started Investing 5 Things You Should Do With Your Money Now." Get the webinar details and register at smartmoves2growridge.com. If you want advanced investment strategies, check out the Winning Investors Guide to How to Pick Better Stocks by Andrew Horowitz. His e-book will help you figure out your investing philosophy and the difference among quantitative, fundamental and technical stock analysis. Download it from your favorite e-retailer, previously published as the Winning Investors Guide to Making Money in Any Market. I'm glad you're listening. Cha-ching. That's all for now. Courtesy of Money Girl, your guide to our richer life. In Colorado, our freedoms are everything. Gabe Evans would rip them away. Just like Lauren Beaubert, he'd ban abortion without exceptions for rape or incest, and overturn the right to marry for same-sex couples. Don't let him take our freedoms. Paid for by DCCC, www.dccc.org, not authorized by any candidate or candidate's committee. Get your holidays started with the perfect tree and your perfect style from the Home Depot. 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