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Welcome to your “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.
Today’s question is about investing in exchange-traded funds, also known as ETFs. ETFs have become one of the most popular ways to invest in stocks, bonds and other securities, attracting many billions of investor dollars. And there’s a good reason why: They allow small investors to put money in the markets easily and inexpensively.
Want to know more about ETFs? Watch the following one-minute video, and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript to find out what I said.
You also can learn how to send in a question of your own below.
For more information on this topic, check out “How to Get Started Investing When You Don’t Have Much Money” and “15 Things You Really Should Know About Money in 2018.” You can also go to the search at the top of this page, put in the word “invest” and find plenty of information on just about everything relating to this topic.
Got a question of your own to ask? Scroll down past the transcript.
Don’t want to watch? Here’s what I said in the video
Hello, everyone, and welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson. You ask a money question, I answer it in less than a minute.
Today’s question comes from Larry:
“Stacy, what do you think of ETFs?”
What’s Larry talking about? ETFs are exchange-traded funds.
You’ve probably heard of “mutual funds.” A mutual fund is just a method of buying a bunch of different stocks, bonds or both, rather than investing all your money in one or two. In short, it’s how you create a diversified portfolio without a lot of money.
Funds come in two forms: traditional mutual funds or exchange-traded funds.
ETFs have some advantages over traditional mutual funds. For example, it costs less to get in.
Some mutual funds have a minimum of $3,000 to open an account. With ETFs, you can buy just one share, which could cost as little as $5. They also have lower management fees than traditional mutual funds: Those fees are the percentage they take out of your investment every year to manage your money. Some mutual funds charge 1 percent per year. Some ETFs charge a tenth as much, or even less.
Finally, you can trade ETFs more easily and more often than traditional mutual funds. In other words, you can get in and out any time during the trading day, because they trade just like a stock. Hence, the name: exchange-traded fund. You can only get out of traditional mutual funds once a day, at the end of the trading day.
As for disadvantages — well, like stocks, whenever you buy or sell an ETF, you may have to pay a commission. If you don’t trade often, no big deal. But if you do, commissions could eat you up.
Bottom line? ETFs are a great idea, a great way to start investing in the stock market, and an inexpensive way to do it. So here’s what I want you to do. I want you to do a search for ETFs online or at MoneyTalksNews.com and learn more about them.
One last tip: While you’re online, look this up: “commission-free ETF trading.” You’ll find some brokerage firms let you get in and out of ETFs without paying a commission.
That’s all I’ve got for today: See you soon!
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The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.
I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.
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