Yes, that’s correct; the most difficult task for any investor lies in identifying the best and hot stocks in any hot sectors like the internet, nanotechnology, biotechnology, energy, housing, telecom or others. Moreover, narrowing down and then zeroing down the two best stocks is perhaps the toughest task for even the most seasoned investor. However, the concept of ETF investing has now removed that difficulty for the long term investor. Yes, we are talking about the new age trading concept- ETF trading, which removes the difficulty of trading. ETFs or the Exchange Traded Funds stands as the hottest investments because they offer you the benefits of both the mutual funds and stocks with none of their downsides.
In fact ETF trading can be done like the stocks. Honestly, you can buy ETFs, sell them and even can trade option on them whenever you want. As, ETFs are typically composed of an array of stocks and since these mimic a particular sector index or market index, the concept of ETF investing offers the investor with state of the art variegation benefits of mutual funds (as compared to owning a few stocks), What’s more? Well, the major benefits of this lies in the liquidity that it offers. This means that investing in ETFs help to keep your financial portfolio fair while providing you the ultimate flexibility to use these for the liquid component.
Yes, you have got that right, ETF trading offers you with more market liquidity and also it provides you more market transparency. This typically means that now you are in liberty to buy or sell ETFs shares as a trader with more price transparency. This is because the present financial market values sophisticated ETF trading strategies just like the hedge fund managers.
Although ETF investing is profitable yet the risk factor, which is involved just cannot be ruled out. In fact trading is one of the most difficult professions to bank on. Well, this is because while other professions demand some amount of certification or a degree before you can embark on an journey into the field, the trading profession on the other hand permits all (whoever has a couple thousands of dollars) to get into the risky gambling game of the stock market. So, the newbies who enter only with the big dream and with palm full money without any solid ETF trading strategy are bound to be the prey of the financial damage that’s caused by the stock option trading market.
As a matter of fact, in the recent volatile financial market ETF investing is a good way to invest smaller amount to get a decent return. However you should avoid the common mistakes while investing in ETFs.
Mistake 1: First thing first own a solid ETF trading strategy and don’t ever commit the mistake of trading without a proper plan and solid strategy.
Mistake 2: Do not trade without setting a goal. You should have the ultimate understanding of your risk appetite on your fingertips. To be on the safer side work on the amount of money which you can afford to risk.
Mistake 3: Do not just jump into ETF trading without understanding the concept of ETF investing. Well, newbies usually think that mutual funds and ETFs are almost the same. In fact ETFs and mutual funds are very similar in many aspects; however there are differences between the two. Understand well the thin line of difference to trade like professional.
These are just few of the many problems faced by the newbies while trading ETFs initially. To be a successful ETF investor start working on these from the beginning.
