Everything You Need to Know About ETF’s

Technology has rapidly advanced many areas of our lives in the past decade or so. One of the more useful ones in the investing world has been the introduction of ETF’s. Exchange Traded Funds (or ETF’s) are becoming more and more popular among investors. Everyone from retail investors to financial advisors and institutions are making them a larger part of their business.

I believe that ETF’s have a lot of advantages. Simply, ETF’s are designed to make investing simpler and easier than ever before. The way that they are constructed, how they are traded, the options they offer, and the ease of use, to name a few.

Out of all that ETF’s have to offer, here are three of my favourite advantages of ETF’s:

1. Diversification

The best way to invest in a safe and successful manner is to diversify your investments. Diversifying means investing in a lot of different companies, from a lot of different sectors or industries, across the globe. Diversifying means putting your eggs in a lot of different baskets, not just one.

ETF’s are made to be very easy to use for investors. They are made up of a bunch of different companies. Instead of having to buy individual shares of companies to achieve diversification, you could buy one share of an ETF and get a small piece of a bunch of different companies. It’s like, instead of buying each individual ingredient to make a pasta sauce, you buy the pre-made pasta sauce you’re looking for. It’s everything you’re looking for, pre-made just for you.

This makes investing easy, and almost foolproof. You don’t have to worry about understanding analytics of investing or the fundamentals of different companies. You could simply just buy the ETF’s of your choice and be well on your way.

2. Trade Like Stocks

ETF’s are great for people who are price conscious or look to trade to increase value. The reason being is because they trade like regular company shares do, unlike mutual funds. Mutual funds can only be bought and sold at the end of a trading day. Whereas ETF’s can be bought and sold throughout a trading day (whenever the markets are open).

Another advantage of the way ETF’s trade, are they allow you to purchase fractions of shares. Instead of having to put an accumulation of contributions to buy one share of a company, you can invest a little bit of money across many different companies, by buying fractions of shares. You don’t have to spend your evenings worrying about asset allocation or rebalancing your portfolio.

I believe that ETF’s give investors more flexibility when it comes to how they invest, and what they invest in. They are easy for long-term investors you use, and they are also good for day or swing traders. People looking to follow the overall movements of the market or specific industries.

3. Variety of Options

There are literally thousands of different ETF’s all around the world, and I expect that number is growing year after year. Not all of them are available in every country or through every investing platform, but even so, for each person out there, there are a number of options readily available.

Whether you’re looking for a globally diversified growth portfolio, a conservative Canadian portfolio, you’re looking to invest across the board in an up-and-coming sector, or anything and everything in between — there’s an ETF for you. There was even the first-ever Bitcoin ETF released earlier this year.

With all of the options available to you, finding an ETF that aligns with your risk tolerance and investment goals has never been easier.

I believe that ETF’s make investing a lot easier for everyone. They are a great option to consider for retail investors or institutional investors. From beginners to pros. They offer everything that you’re looking for in an investment solution, but at great ease of use, and generally at fees much lower than mutual funds.

About the Author

Derek Condon, CFP®

Derek Condon is a Certified Financial Planner and Mortgage Advisor specializing in financial planning, investments, wealth-preserving insurance, mortgages, and others. I help my clients with a variety of goals. From someone who is just starting their investing journey to a retiree managing their wealth. From a first-time home buyer to someone refinancing to get their very best mortgage. And, of course, everywhere in between.