Investing with Exchange Traded Funds (ETFs) for the Individual Investor

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Complete Guide to ETFs for Newbies

When ETFs were first introduced, most only tracked the largest and broadest Indexes, but in recent years, they've grown in sophistication and popularity. Today you can buy ETFs that track just …

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Exchange traded funds (ETFs) are powerful tools for assembling diversified portfolios. What’s more, they are available for use by investors both large and small. This site is geared towards discussing the needs of the individual investor. The following paragraphs highlight articles I think are key to learning about exchange traded funds as well as investing in general.

Before diving in, you’ll want to first get a high-level understanding of what is an ETF. There’s also a bit more information about the difference between closed-end funds (CEFs) and ETFs and how ETFs are priced. For an even more in-depth look, check out the guide to ETFs which also touches on the common question of ETFs vs mutual funds.

And then, once you know what ETFs are, take a look at the investment strategies that can be applied using ETFs. I tend towards the buy-and-hold philosophy, but several other strategies are discussed as well. I’m pretty much a do-it-yourselfer when it comes to investing my money, but if you’re on the fence about it, consider the items discussed in my look at online investing vs. traditional financial planners.

With a basic understanding of ETFs, consider looking into things like ETF timing (not that I recommend it), why active traders fail, and how investment books fail. Although everyone’s situation will be different and will require a portfolio with particular characteristics, you may find some good ideas from ETF portfolios assembled by well-established and successful institutional investors.

With an ideal portfolio in hand, you’ll need to examine the list of ETFs available to find the ones that you can plug in to achieve your investment goals. It would also be wise to understand the tax implications of different ETFs e.g. do they have high portfolio turnover?

In terms of maintenance, you should familiarize yourself with the ideas behind dollar cost averaging, getting around the IRS’ wash-sale rules and rebalancing your portfolio. And since most people would be advised to maintain some sort of cash-based holdings for emergencies and ETF buying opportunities, there are some specific recommendations for where to stash cash for the short-term.

Beyond the specific areas of ETFs and if you’re entirely new to the world of investing, be sure to check out the 10 basic principles of investing. I’ve also got quite a bit of additional content on investing in general. I think of particular interest are the fairly length posts on 401K plans as well as a look at IRAs, Roth IRAs, and Roth 401Ks.

As with all things relating to money, don’t take my advice as gospel. Do your own research and question everything you read whether it comes from a web site or from a financial advisor. I wish you luck building and maintaining your investment portfolio!