ETFs and Mutual Funds - Empowering Average Joe Trader
Let's be honest... the average Joe Trade is awful at picking stocks. I am awful at picking stocks (don't ever listen to my stock suggestions). Everyone I know is awful at picking stocks... but everyone knows what the hot sectors are these days right? During the Internet boom, everyone knew Internet stocks were crazy! Get in on the IPO and get rich! The problem was Joe Trader picked a stock, it tanked, he (or she) was burned, and quit trading all together. Diversification is Joe Trader's best friend and ETFs/Mutual Funds allow Joe Trader to capitalize on the "hot sector" concept without swinging at the blazing fastball and striking out miserably. ETFs are like fast moving mutual funds because you can trade them throughout the day, whereas with a mutual fund you need to wait until the end of the day. That's why ETFs are becoming more popular.
Yahoo! Finance has a great section on ETFs (Exchange Traded Funds). Morningstar has a very good ETF section as well. Read them and understand them thoroughly because I'm not going go into them in detail. The main difference is that ETFs have intraday prices and trade like stocks (with commission fees too!) whereas mutual funds are traded using end of the day prices.
Money is rushing into ETFs like crazy, ETF assets grew 47% to $222 billion, according to Morningstar. (Article, requires free registration, use BugMeNot) Why? Because ETFs empower the regular trader and allows them to invest in a "hot sector" with little work involved. Do you believe, like everyone, that Biotech and Energy are hot? Invest in an Energy-ish ETF. Right now they top Morningstar's lists of great performers.
There are downsides to ETFs, mostly regarding commission fees eating into your return, so do your due diligence. Allow this article to open your mind to the concept of ETFs and what they can do for the average trader. Instead of pumping all your cash into Company X because you believe that sector is hot, you can consider pumping it into an ETF for that sector instead.
This post was originally published at Blueprint for Financial Prosperity, a PFBlog Network contributor. Please read and post your comments there. Thanks!
• VirtualBank gives you up to 5.13% APY for your savings!
• Blue Cash from American Express: 5% Back on Gas, Up to 5% cash back on eligible purchases, No Annual Fee, 0% Introductory APR for 6 months, Pay over time
• Try Starwood Preferred Guest Credit Card from American Express. Great rewards and first year fee free!
• Bad Credit Home Loans
• Life Insurance in 10 minutes if qualified. No medical exam.
This is part three of five on alleged 25 rules of investing that Jim Cramer has listed on his site, TheStreet.com, plus my own commentary. The first five were basically cute little catch phrases on some common-sense rules. Rules six through ten were a little ... Read
I started this look at Jim Cramer's 25 Rules of Investing with the first five rules a little while back. The first five didn't bring anything new to the table but did remind me of some good adages to remember. Let's check out the next ... Read
Okay, first I watched Jim Cramer's Mad Money show (and let you all know what I thought), which led me following his column on TheStreet.com about his 25 Rules of Investing. He has a new book too called Real Money: Sane Investing in an Insane ... Read
Nathan, a fellow PFBlog network writer, talked about Jim Cramer's Mad Money television show in an article here. Well, that made me bring up an article I wrote in the past about Mr. Cramer and some accusations... I saw an interesting article (technically it's a ... Read
