S&P 500 ETF - A Must Have For Your Investment Portfolio
At one time in days long gone by portfolio diversification it was very unusual if you had invested in mutual funds.
More and more however, diversification became the norm but the problem was that with this came lack of knowledge and transparency as to what was being invested in.
Furthermore buying and selling during trading was very limited.
And then, mutual fund holders were unable to utilize options to either improve upon performance or reduce risk from falling prices.
Now though this has all changed.
With the advent of Exchange Traded Funds or ETF funds you can now have diversification and these can safely be used by investment veterans and beginners alike.
So, the most basic form of an ETF can be described as a fund that contains a fixed stock selection.
There are some like the iShares S&P 500 ETF Fund (IVV) that mirror an index and then there are some like the S&P Homebuilders ETF (XHB) which only focus on one industry - in this case home building and all things related.
With low fees, wide diversification and more active trading ability, ETF's have become very popular indeed.
Added to this you can also trade options upon ETF's and its clear what exactly you are investing in before you take the plunge.
Furthermore there tends to be a broad range of companies that are traded within the ETF such as in the S&P 500 ETF - 500 companies, unlike mutual funds which are limited.
ETF's also have the lowest expense ratios of all traded funds - even as low as 0.
9% - because they are rarely changed and thus incur few costs.
If you have mutual funds and you wish to sell you have to wait until the end of the trading day and after the value of the funds are calculated you will be sent your money.
With ETF's you trade within the trading day and the buy or sell is confirmed within an instant - either online or on the telephone.
You can very easily short an industry using ETF's.
If you purchase the put option you can profit from a market fall while at the same time you are protected from any other outcome.
So all in all ETF's offer so much more than the traditional mutual fund and at the same time offer a high degree of safety if you trade the options strategy.
More and more however, diversification became the norm but the problem was that with this came lack of knowledge and transparency as to what was being invested in.
Furthermore buying and selling during trading was very limited.
And then, mutual fund holders were unable to utilize options to either improve upon performance or reduce risk from falling prices.
Now though this has all changed.
With the advent of Exchange Traded Funds or ETF funds you can now have diversification and these can safely be used by investment veterans and beginners alike.
So, the most basic form of an ETF can be described as a fund that contains a fixed stock selection.
There are some like the iShares S&P 500 ETF Fund (IVV) that mirror an index and then there are some like the S&P Homebuilders ETF (XHB) which only focus on one industry - in this case home building and all things related.
With low fees, wide diversification and more active trading ability, ETF's have become very popular indeed.
Added to this you can also trade options upon ETF's and its clear what exactly you are investing in before you take the plunge.
Furthermore there tends to be a broad range of companies that are traded within the ETF such as in the S&P 500 ETF - 500 companies, unlike mutual funds which are limited.
ETF's also have the lowest expense ratios of all traded funds - even as low as 0.
9% - because they are rarely changed and thus incur few costs.
If you have mutual funds and you wish to sell you have to wait until the end of the trading day and after the value of the funds are calculated you will be sent your money.
With ETF's you trade within the trading day and the buy or sell is confirmed within an instant - either online or on the telephone.
You can very easily short an industry using ETF's.
If you purchase the put option you can profit from a market fall while at the same time you are protected from any other outcome.
So all in all ETF's offer so much more than the traditional mutual fund and at the same time offer a high degree of safety if you trade the options strategy.
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