By Erik L., President of FocusShares® and Guest Blogger
Unless you’re very fortunate, you probably have a finite amount of income you can devote to investing – pick the wrong stock, and you could lose some of your hard-earned cash. That’s why most investors seek a diversified portfolio where they’re not dependent on the performance of only a few securities. If you’re looking for diversification, relatively low expenses and the flexibility to trade throughout the day, exchange-traded funds, or ETFs, may be for you.
ETFs typically track the price and yield performance, after fees and expenses, of various indexes such as the S&P 500® or those developed by Morningstar. They provide diversification within a broad market or within specific market sectors, such as health care or financial services. You’ll still have to spend time researching how to invest your funds, but ETFs are a more cost-effective way to build a diversified portfolio than trying to buy a large group of stocks on your own. While not void of risk, ETFs remove the risk of buying a single stock.
Passively managed ETFs typically will have lower management fees than actively managed mutual funds. In fact, Scottrade’s 15 ETFs sponsored by FocusShares® are based on Morningstar® indexes and have some of the lowest expense ratios available in their categories. They’re also available for free to Scottrade customers who trade online.
Scottrade’s ETF education in the Knowledge Center and your local branch office can also help you learn more about ETFs and help you become a better informed investor.
Want to continue the conversation? Go to the Scottrade Online Community.