As i was looking what types of investing i can do and i was told that ETF is a great place to invest. Now i have 0 idea what ETF is and how it works, where should i go to invest is there a platform or through banks? And any other relevant information that may help me understand. Thank you guys in advance!
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An ETF is an ‘exchange traded fund’. It is similar to a mutual fund except instead of just putting money into the fund you buy shares of it. Similar to a mutual fund, an ETF is offered by brokers like Charles Schwab as a convenient way to invest in sectors of the market more broadly than if you selected individual stocks and with less risk. ETFs occasionally turn over, SCHD (popular in dividend investing) rolled some companies out and took on new ones. For example, they recently bought Ford stock as part of the ETF. You are always allowed to view the underlying stocks that make up an ETF.
Here are the top ten stocks in the QQQ fund:
[https://www.invesco.com/qqq-etf/en/about.html](https://www.invesco.com/qqq-etf/en/about.html)
If you buy QQQ, you don’t have to go and buy Microsoft, Apple, Meta, etc. It is generally good advice to look at the underlying stocks; if you like what you see you may decide to buy shares of that fund.
Most ETFs are ‘index funds’ which can be a very economical way to invest in funds. They generally charge far less fees than an actively managed fund. In fact, there have been multiple studies that have demonstrated index funds perform better than actively managed funds *and* cost you less. Don’t buy your broker a Porsche for them, they don’t deserve it with *your money*. There are some fees associated with index funds but they are manageable.
Actively traded funds, like Cathy Wood’s ARK, are actively managed and much more expensive. The before mentioned QQQ has an expense ration of .2%. ARK is 4.22% which includes a whopping 2.75% as a ‘management fee’. I can’t tell you how to invest because I am not a financial advisor and I have not passed any series exams, I am just saying you can see the numbers for yourself.
For your employer based 401(k), just as an aside, look very critically at ‘actively managed’ accounts. The math is usually not on their side when you consider fees and expenses. They will have a nice helpful person bring in lunch and be your best friend, look upon them like the greasy middle men/women they are. Their salary is paid with your money.
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