How to Buy ETFs
An Exchange Traded Fund (ETF) can be purchased through a stock broker or online brokerage account listed on public stock exchanges as if it were any other stock. These derivatives track the performance of exchanges as a whole, often making use of leverage, short sales or both to give investors an option for broad investing no matter what the status of the market.
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Instructions
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Research your ETF options and determine your trading strategy. Some examples include the Standard & Poor's Depository Receipts (ticket symbol SPY), which tracks the performance of the S&P 500. Others include ETFs that track the market in gold or diamonds, or even foreign exchanges.
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Read the prospectus of the ETF for details about how the fund is managed, its expense ratio and what its components are made of. The prospectus is basically similar to the one offered by a mutual or hedge fund, but because they are not actively managed, it will focus more on the assets that make up the ETF rather than its performance.
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Learn the difference between ETFs and mutual funds. Mutual funds are actively managed groups of stocks and other asset classes that charge higher fees to investors. ETFs, after they are aggregated into shares, are not actively managed.
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Be aware of however much leverage an ETF uses. Some ETFs are massively leveraged, which means that only small movements in the value of the exchange or other basket of assets that it tracks will lead to large changes in the value of the ETF.
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Use ETFs as a hedge against other other investments - or as a primary pillar of your investment strategy, whichever you choose. Short ETFs, which short sell baskets of stocks, are less risky than shorting stocks yourself. Leveraged ETFs let you take the risks of leverage without going into debt.
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Resources
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