Canadian Finance Blog

Want An Investment That Can Manage Itself?

Posted: 13 Jan 2011 02:00 AM PST

Want an investment that can manage itself? ETFs may be exactly what you need

The problem for investors is really the quality of investment market products. Stocks can be a turgid trek through the icy depths of the down market, bonds can be considerably less exciting than watching grass grow, futures can seem downright nutty, the forex market is great if you're a calculator, and the commodities markets could confuse a house brick. Some investors, particularly managed funds, are moving to Exchange Traded Funds as more reliable and more dynamic investment options.

The short end of self managed investment, and how to avoid it

The problem is common to all investors… how to minimize risk and get a reliable rate of return? The stock market can pay very nicely, but not for long periods of time. Accumulating capital is often tricky, particularly if it involves tying up capital and managing a budget.

The other risk factor is losses, and they can get nasty. A few hits from the market can make an investment portfolio look pretty sorry for itself. Investors feel, with reason, that the market is too often a good way of going backwards. Even expert traders take these hits every once in a while. Most investors don't think they should need to take a survival course to make money off their hard- earned cash, and nor should they.

Exchange Traded Funds – Covering bases the easy way

Exchange Traded Funds are basically like mutual and unit trusts. Your money is invested in a basket of stocks within a defined index or class of stocks. ETFs trade as units, at prices determined by the net value of the fund's holdings. These funds also issue dividends, and occasionally do splits, issuing more stock on the basis of holdings.

Note: ETFs do charge management fees, usually less than 2% of the value of the funds under management.

As all investors find out sooner or later, the usual state of the market is that some indices are doing well and others aren't. ETFs allow people to spread their investments across several indices at once. The big advantage for investors is that ETFs are also a great way of investing in things like Aerospace, energy, food, and blue chips. Instead of following individual stocks around until you can make some money on them, the ETFs, which have their risks better spread, benefit from sector movements.

ETFs and the future

ETFs trade in real time on the stock market, and they've become very popular among traders for their reliability. About $1 trillion of funds is currently under management in the US, and the ETFs have become so successful that even the mutuals and major banks like Deutsche Bank are starting to introduce their own Exchange Traded Funds.

If you're looking for a way to invest selectively with minimal management issues, ETFs are definitely worth a look. The major online finance sites allow you to do thorough research on ETFs, check performance history, and see how the returns on investment work.

There's no need to suffer to invest your money. Check out the ETFs and see what's possible.

Author Bio: Tim Millett is an Australian freelance writer and journalist. He writes extensively in Australia, Canada, Europe, and the US. He's published more than 500 articles about various topics, including Cash Loans.

No related posts.

Want An Investment That Can Manage Itself? originally appeared on Canadian Finance Blog on January 13, 2011.