Investing is one of the necessary ways in which one grows their money through placing funds in growth accounts and holdings such as dividend stocks, bonds, real estate, gold and even commodities. Though some people opt to hold on to cash reserves for emergencies, to make your money grow and thus work harder for you in comparison to simple savings accounts, using an assortment of investing vehicles to create a diversified portfolio is the best approach to helping create a long-term investment strategy that will pay off in higher return rates over time, and thus increase net worth and financial health and well-being.
One of the most comprehensive investment vehicles is referred to as an ETF which stands for Exchange traded Funds. This holding is a collection of stocks, bonds and commodities. This type of fund trades on the open market, in the same manner as individual stocks and is thus subject to market volatility. The crux of an ETF is that the price per share is high, and one must be approved to trade such shares of the fund as individual investors with low trading dollar volume typically are not allowed to trade ETF’s as participation must be offered and approved prior to being able to reap rewards of such funds. ETF’s are typically reserved for institutional investors who have block trade buying and selling ability on the market.
Individual investors able to trade ETF’s must understand that even though they appear to be formulated in the same manner as a mutual fund, with a mix of asset holdings, an ETF can be traded multiple times throughout the day and thus the price fluctuates along with the rest of the market. In contrast, mutual funds, which also have roughly the same mix of financial holdings, are valued and priced once per day and thus have more stability when compared to an ETF. ETF trading is a good option for aggressive traders hoping to have high growth and higher risk investments in their overall and total portfolio.
So which do you think is the safer and more stable route? ETF or Mutual Funds?