The Complete Guide to ETFs for Non-Investors

To take care of your assets and not let inflation eat them away, there are some simple strategies that can be applied. Nowadays, there are financial instruments whose objective is saving, such as dollar accounts, bonds, stocks and others. Here we will show you the complete guide to ETFs, one of these investment instruments, dedicated to non-investors.

Inflation is a recurring economic process that over time, and to a greater or lesser degree, reduces the usability of our money.

For this reason, experts recommend that, whenever possible, any surplus money we set aside for savings should be invested.

The most basic form of investment is a savings account, as it pays interest on the money placed there.

There are also other forms of investment that are a little more complex and require certain knowledge.

On the other hand, there are instruments, such as ETFs, that do not require extensive financial knowledge and can be perfect for those who consider themselves non-investors.

What is an ETF

These financial products were created in the United States in 1993 and have been gaining popularity in the rest of the world since then.

ETFs or Exchange Traded Funds are a form of investment that combines the ease of trading a share with the diversification of an investment fund.

They are traded on a stock exchange, in the same way as a share.

ETFs act as a basket containing a variety of assets, such as stocks, bonds or commodities.

These funds are managed by an investment company that is responsible for buying and selling the underlying assets as part of an ETF‘s portfolio.

The value of this product fluctuates based on the value of the underlying assets that comprise it.

ETFs are offered to the public for purchase and sale through a stock exchange.

This means that investors can buy and sell ETFs or shares thereof on the open market during exchange trading hours and get a fair price.

This is a key difference from mutual funds, which have a fixed price and prices are determined only at the end of the day.

On the other hand, ETFs have low operating costs and low management fees.

Another key feature that makes the ETF an attractive product is diversification.

The funds present a diversified portfolio containing a wide range of assets, such as indices, stocks, bonds, commodities and derivatives.

This helps investors reduce their risk by investing in one ETF instead of multiple mutual funds or individual stocks.

How to invest in ETFs

To invest in ETFs, an investor must follow the following steps:

Choose a broker: You need to have an account with a broker to buy and sell ETFs.

You can choose an online broker or a traditional brokerage. Banks also have brokers who handle these procedures.

Research available ETFs: There are a wide variety of ETFs available on the market, with a wide range of underlying assets.

Research the ETFs that are available and choose the ones that best fit your investment goals.

Select ETFs: Once you have chosen your ETFs, you can purchase them through your stockbroker.

Adjust and monitor your portfolio: Once you have invested in ETFs, it is important to monitor them and adjust them as necessary.

It is also important to maintain a diversified portfolio and rebalance it regularly to ensure it stays in line with your investment goals.

Selling or holding your positions: If you wish to sell your ETF positions, you can do so through your broker at any time during the exchange’s trading hours.

However, it is important to note that ETFs are a long-term investment, so it is advisable to hold positions for an extended period.

Is it safe to invest in ETFs?

ETFs are a safe way to invest in the market, but as with any investment, there are risks associated with them.

Because ETFs are made up of a variety of assets, their value fluctuates based on the value of those assets.

If an ETF’s underlying assets fall in value, so will the ETF.

However, by investing in an ETF, you are investing in a diversified portfolio of assets, which reduces or dilutes the risk of loss compared to investing in a single asset.

In addition, ETFs are regulated by regulatory authorities and backed by a fund manager, which provides a certain degree of security.

It is important to keep in mind that ETFs are a long-term investment.

For this reason, it is advisable not to buy or sell ETFs based on short-term market fluctuations.

Also, it is important to research ETFs before investing and maintain a diversified portfolio.

If you have any doubts about whether ETFs are suitable for you, it is advisable to consult a financial advisor before making any investment decisions.

Does it take a lot of money to invest in ETFs?

You don’t necessarily need a lot of money to be able to invest in ETFs.

To start, many brokers have a minimum requirement, which is usually not high, to open an account.

Additionally, many ETFs have a low purchase price, meaning you can buy several shares with a small amount of money.

On the other hand, there are some stockbrokers who offer the service of buying fractions of shares, known as “fractional shares.”

This allows investors to purchase only a fraction of a share, rather than having to buy a whole share, reducing the initial investment requirement.

It is important to research ETFs and carry out proper risk management and not invest all the money you have in a single ETF or in a single sector, ensuring adequate diversification.