ETF - It is an abbreviation used for Exchange Traded Fund. Exchange-traded funds are considered the most essential and valuable commodity that is specifically created for individual investors. If you are well versed in the trading of the stock market, you would know how to use it wisely. All the benefits offered by the ETFs would turn out to be the best vehicle that will help you achieve your investment goals.
In the process of exchange-traded funds, the financial assets of the individual investors are collected and further used to purchase tradable financial securities. For instance, the collected amount will be used to purchase different shares, mutual funds, and debt securities such as derivatives and bonds. Generally, the ETFs are a secure option as they are registered with the government authorities - U.S. Securities and Exchange Commission. Due to this reason, ETFs are considered an attractive option for individual investors who have limited expertise and understanding of the stock market.
There are various types of ETFs, but here we would be discussing the major 5 ETFs that would be beneficial for individual investors.
Stock ETFs: If you are interested in gaining long-term benefits and financial growth, then Stock ETFs would be the best option for you. If you invest in these ETFs, then the risk level would be extremely low compared to the individual stocks.
Commodity ETFs: Commodities included in this type of stock are generally raw goods, such as gold, crude oils, or coffee. You can easily buy and sell them as per your preferences. In commodity ETFs, all these securities would be bundled up as a single investment. Before you set out to buy Commodity ETFs, you must check out what those ETFs include. The securities included in the ETFs can vary drastically. So you must choose the ETFs that you might feel the most beneficial. Commodity ETFs are generally risky, so you must plan out your financial budget and then buy Commodity ETFs.
Bond ETFs: If you, as an investor, are looking for a way to generate regular cash from your investment, then Bond ETFs would be the best choice. Bond ETFs‘s one of the most important aspects is that they do not have any maturity date. Bond ETFs would be a great choice for all the individual investors as it has lower risk as compared to other ETFs.
International ETFs: Wishing to have a diversified portfolio? Then you must consider investing in International ETFs. These are basically foreign stocks that will help in building a diverse portfolio. These ETFs also pose less risk, so you can easily invest in them and get high returns in terms of interest.
Sector ETFs: Do you know that in the stock market, all the company's shares are available. These companies are divided into various sectors, such as pharmaceutical, textile, manufacturing, etc. When the company's shares are divided into various sectors, it becomes easy to manage them. With the help of sector ETFs, you can invest in particular companies in which you are interested such as health care or finance, or any other. In this way, you can diversify your portfolio but keep in mind that it poses a high risk. So choose wisely.
Investing in the stock market is beneficial for every individual. But the most important thing that each one of us should keep in mind is that these investment instruments are always subjected to market risk. So you must consider your financial condition, budget, and risk factor before you start investing in ETFs.