Why ETFs make the perfect choice for the investor who doesn’t have a lot of time

Julie Brownlee, Fsp Invest, 30 Oct. 2015

Tags: etfs, what are etfs, exchange traded funds, investing in etfs, benefits of etfs, investing in shares, investing,

If you want to invest in the stock market, the prospect of delving through company financial statements and pouring over charts may not appeal.

If you don’t have time to devote to researching individual stocks, then exchange traded funds (ETFs) take that problem away.

So what are ETFs? And what are the benefits of investing in them?

Read on to find out…

What are ETFs?

ETFs are baskets of shares. They trade just like shares, but instead of being dependent on what one particular company does, they reflect the performance of a number of shares.

For example, take an ETF on the JSE’s Top 40 Index. The fund will hold shares that make up the index in proportion to their size on the stock market. When you invest in an ETF like this, the performance on the ETF will depend on what all the shares in the Top 40 do.

Instead of gaining or losing from the performance of one share, you gain or lose depending on all the companies making up a benchmark index.

The types of ETFs

There are many different types of ETFs on the market. In terms of shares, you can invest in ones tracking the Top 40 Index, property companies, financial and resources.

There are also ETFs that track international markets, such as Europe or the UK.

You can also invest in ETFs that track government bonds and precious metals such as gold and platinum.

The benefits of investing in ETFs

By investing in ETFs, it takes away the hassles of picking individual shares. In return for this, the ETF will reflect the performance of the market.

They’re more affordable to invest in as you can invest on a monthly basis, instead of investing a lump sum all at once into the market.

They make good long-term investments as you can regularly contribute to them and in time you should see their share prices reflect this.

So there you have it. Why ETFs make the perfect option for the investor who doesn’t have a lot of time.

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