All investments require a substantial amount of capital to create a diversified portfolio. These capital requirements pose challenges to newbie investors, who often have low investment funds. However, the Exchange Traded Funds (ETFs) make the process easy for investors even when they have little capital. The risks involved are also low. Here are the other features which make ETFs the ideal option for beginner investors:
Wide ranges of ETFs
ETFs are found in all asset classes including real estate, commodities, stocks, bonds, currencies, and other niches. The high ETF competition by the ETF issuers and high demand from traders has resulted the introduction of specific ETFs that focus on specific market segments and market niches. Also, these extensive arrays of ETFs offer a variety of investment options which cannot be found in index funds. The ETF range also means that the beginner investor may create a diversified portfolio with a smaller capital than the one they would have required in the past. The main ETF types are market ETFs, bond ETFs, Sector ETFs, commodity ETFs, style ETFs based on market cap, inverse ETFs, foreign market ETFs, and leveraged ETFs
ETFs are liquid and can, therefore, be traded throughout the day. This becomes a highly differentiating factor among investors who would like to exit the market when necessary. The liquidity ETFs feature also provides the newbie investors with the opportunity of using them for intraday trading, just like stocks.
ETFs offer low attractive fees than mutual funds. Their performance in the past was equal or better than most managed funds and this has led to the wide adoption of ETFs. Although they are sold and purchased like stocks, most online brokers offer some ETFs without a commission, especially to the investors who are just starting. This motivates and makes things easy for newbie investors to trade without putting a dent into their accounts balance.
Keeping up with trends
ETF issuers have been continuously introducing new and innovative products in the markets. This innovation and dynamism displayed by the ETF issuers is an effective method of appealing a broad audience of investors. As new trends continue to get underway for more and more investment products, more ETFs will undoubtedly be made available to meet the ever-rising ETFs demand.
Investment management choice
ETF investors can manage their investments in different styles such as active, passive or anything in between. Investors who are not conversant with the financial markets intricacies can start with the passive management approach and later move on to the more active styles. Sector ETFs allow investors to take both bearish and bullish positions in specific positions. The inverse ETFs together with the leveraged ETFs allow investors to follow a multitude of portfolio management strategies.
ETF investments are ideal for both the rookie and advanced investors. They provide a quick and efficient method of investing in the markets without necessarily researching on individual companies or constructing well-structured portfolios. Not everyone has the energy, time and information to create well balanced portfolios, but ETFs facilitate investors’ adequate access to multiple diversified assets.