How to Invest in an ETF?
Updated on 23 Feb 2020
According to the research firm ETFGI, there are now as many as 5,000 ETFs trading globally, with more than 1,750 of these based in the U.S. Choosing from this vast pool can be daunting, so here’s a step-by-step guide to help you choose the perfect ETF for your first investment!
Exchange traded funds (ETFs) have emerged as one of the most popular and reliable forms of investments available in the market. These funds track well-performing indexes and offer returns that match them. ETFs typically contain securities that can range from stocks, bonds, commodities, or even a mix of them all, making them great options for investors who want a diverse portfolio. If you’re planning to grow your wealth in way that lets you regulate your exposure to risk, ROIs, and even the level of diversification that your portfolio has, then you should definitely invest in ETFs.
In this article, we’ll tell you everything you need to know about how you can go about buying ETFs and growing your wealth!
How to invest in an ETF?
One of the things that makes ETFs easy to invest in is the fact that they are listed on the Stock Exchange and can be bought and sold in the same way stocks typically are. This means that you can trade in ETFs through any online broker or traditional dealers.
How to choose the right ETF for your needs?
Before you begin investing in ETFs, you must be able to identify the right ETFs for your needs. One of the best ways to do this is by analyzing your goals and basing your decisions on the same. As a novice investor, the ideal of establishing goals that are set way ahead in the future might be a bit daunting, but all it takes is a little bit of self reflection and an honest understanding of what you want in life.
Step 1: Identify Your Goals
Start by envisioning the life you want to lead. What do you picture? Are you debt-free? Retired? Do you wish to travel the world? Treat these dreams as very real goals and you’ll find that you’re able to achieve them all. To get you started, we’ve listed down a few examples of common goals that people identify:
- To save enough money to facilitate one’s child’s education abroad
- Pay off mortgages or loans taken on property
- Be able to retire at an early age
- To start your own company
- Clear any existing debts such as medical bills, education loans, and so on
- Travel the world without any financial hindrances
Once you’ve identified your goals, you must then estimate the funds you need in order to achieve them. For some goals, this is relatively simple. For instance, if you have a pending student loan of $ 20,000, you are clear about the sum you need to be free of debt. On the other hand, if you want to travel the world, you must jot the average cost of flight tickets, accommodation, food and miscellaneous expenses, account for inflation, and then come up with a number that represents what you will really need.
Step 2: Choose a Comfortable Term Period
After all this, you must then set yourself a timeline to achieve the goal. You might want to retire by 40, or buy a home by the time you hit your 30s. With this, you’ll have a basic idea of the term period that you are comfortable with.
Step 3: Identify Your Risk Appetite
We believe that an investment that makes you sweat at night isn’t something that’s worth your time. Ultimately, every investor is comfortable with different levels of risk, and this is something that must drive their decisions. It is also important to understand that low-risk ETFs also offer a lower yield when compared to high-risk investments, and you may have to either adjust your expected ROI or term period to meet your goals.
Step 4: Choose an ETF
Finally, you need to then identify the ETFs that offer the returns you expect in the term period you would like to invest for. You must go through the past performances of the ETF, understand market conditions well enough to feel confident about investing in it, and be quick-witted enough to predict market conditions that may just cause your stocks to plummet. Then, and only then, can you actually pick an ETF to invest in.
How to Invest in ETF – Ask the Experts!
At Kristal.AI, our experts have decades of experience. We are able to conduct astute predictive analysis and accurately identify the right ETFs for your needs. What’s more, our superior AI enabled recommendations help us narrow down the best possible ETFs for goals, risk appetite, and chosen term period. Through this, we are able to tell all our clients about the perfect investment avenues and all they have to do is sit back, relax, and watch their money grow.
The materials and data contained herein are for information only and shall in no event be construed as an offer to purchase or sell or the solicitation of an offer to purchase or sell any securities in any jurisdiction. Kristal Advisors does not make any representation, undertaking, warranty or guarantee as to the update, completeness, correctness, reliability or accuracy of the materials and data herein. All opinions, forecasts or estimation expressed herein are subject to change without prior notice. Kristal Advisors and its affiliates accept no liability or responsibility whatsoever for any direct or consequential loss and/or damages arising out of or in relation to any use of opinions, forecasts, materials and data contained herein or otherwise arising in connection therewith.