ETFs Can Offer Reduced Risk, Less Volatility

Making ETFs Work for You

ETFs have become popular among investors because of their convenience, mitigation of risk, liquidity and affordability.

* Convenience - Most ETFs are designed to track one industry or region of the globe such as "real estate", "China Region", "technology", or "health & biotech". Once you've identified an industry you're interested in, an ETF is a convenient way to view and track that industry's performance over time.

* Mitigate risk - An ETF is comprised of a collection of individual securities. As a result, securities in an ETF that perform poorly may be balanced-out by ones that perform well. This can work to an investor's advantage by balancing out some risk. Though you will still have the general market risk of the industry or category of assets the index is tracking.

* Liquidity - Unlike mutual funds, ETFs trade throughout the day - like a stock. This can make them more convenient to buy or sell than other investment vehicles that are only processed at the end of the day.

* Affordable - Since ETFs are composed of a collection of individual securities, they can be an affordable way to buy many securities at once without having to pay a large amount in commissions. For example, trading the S&P 500 ETF is an affordable way to buy shares in all 500 companies represented in the S&P 500 index without having to pay a high cost for each individual stock.

Selecting an appropriate ETF?

To help select the appropriate ETF(s) for your needs, consider taking these following few steps: