ETFs have become very popular investment vehicles and are our investment of choice at Blue Haven Capital. ETF stands for exchange-traded fund. ETFs trade on the US stock exchanges just like a normal stock does. So if you have ever bought or sold a stock, then buying and selling an ETF is very similar. ETF’s have share prices just like stocks do, and you can buy and sell them at any time.
How are ETFs different from stocks?
Where a stock represents shares in one specific company, like Apple stock, an ETF represents shares in many companies. Remember, an ETF is a fund. And in this case, the fund is going to invest in different securities (usually stocks or bonds). Here’s how it works:
- An ETF chooses which stocks it is going to invest in
- The value of the ETF rises or falls with the value of the stocks inside of it
A good analogy for understanding ETFs is shopping at the grocery store. When you go to the grocery store, you shop for many different items, but you only use one cart. In our analogy, the ETF is the shopping cart and the many different stocks are our grocery store items.
Many investments bundled together
The most popular ETF’s may contain well-known stocks like Apple (AAPL), Amazon (AMZN), JP Morgan (JPM), Nike (NKE) and tens of others! An ETF may contain 50-100 different stocks inside of it, or between 100-1000. There is a huge amount of variety when it comes to picking the best ETF’s to invest in.
Here are 3 key reasons why they have become so popular:
- Affordable. Instead of having to spend money on multiple transactions buying 10 or 20 different stocks, you can make one transaction and have exposure to all of them.
- Stocks like Amazon can cost $1,600 or more for 1 share, but an ETF that owns Amazon stock may only cost $30-$70 per share. This allows you to invest in Amazon stock at a fraction of the price.
- Variety. There are hundreds, if not thousands, of ETF’s to choose from.
- Want to invest in the best technology stocks? There’s an ETF for that. Want to invest in the safest bank stocks? There’s an ETF for that. Want to invest in emerging markets like China or India? There’s an ETF for that too!
- Liquidity. All ETF’s can be bought or sold immediately, just like stocks can.
- This contrasts from mutual funds, which cannot be bought or sold until the stock market closes for the day.
We’ll find the best ETFs for you
At Blue Haven Capital, we specialize in identifying the best ETF’s to invest in for our clients. The affordability of ETF’s allow us to keep trading costs low, and those savings flow directly to our clients in the form of higher returns. We scan through hundreds of ETF’s to find the best ones to suit each client’s individual needs and investment objective. If you want to learn more about ETF’s, contact us.
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