The Basics of ETFs with Evan from My Money Marathon
Jun 8, 2023
47:33
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Quick takeaways
ETFs provide diversified exposure to multiple stocks, reducing risk for investors.
Index funds passively track specific market indices like the S&P 500, offering a low-cost investment approach.
Choosing ETFs aligned with investment goals, monitoring performance, and minimizing expense ratios are key for successful investing.
Deep dives
Understanding ETFs and Their Role in Diversification
Exchange Traded Funds (ETFs) offer a simple way to diversify by bundling multiple stocks into a single fund that can be traded on stock exchanges. This allows investors to access a wide range of stocks in one go, reducing risk and providing a cost-effective investment option. ETFs such as VOO can be ideal for beginners looking to enter the stock market with a diversified approach.
Differentiating Between Index Funds and ETFs
Index funds are a type of ETF designed to track specific stock market indices like the S&P 500. By investing in an index fund such as VOO, investors gain exposure to all the stocks within that index. The key distinction lies in the fund's focus on mimicking the index's performance, providing a more passive approach to investing compared to actively managed funds.
Selecting ETFs Based on Investment Goals
When choosing ETFs, investors should align their investment goals with the fund's objectives. Factors to consider include diversification, industry interests, and desired returns. High dividend yield ETFs or those focused on specific sectors like green energy can cater to different investment preferences.
Evaluating ETF Performance and Costs
Monitoring the historical performance of an ETF can provide insights into its stability and growth potential. Additionally, assessing the fund's expense ratio is crucial as it affects the overall return on investment. Low-cost ETFs like VOO with expenses as minimal as 0.03% are favored for long-term investment strategies.
Getting Started with ETFs and Portfolio Building
Opening a brokerage account is the initial step to start investing in ETFs. Choosing a suitable platform based on trading preferences helps kickstart the investment journey. Building a well-diversified portfolio using ETFs like VOO allows for a balanced and sustainable approach to long-term investing.
Monitoring ETF Performance and Investment Habits
Regularly checking ETF performance, ideally on a weekly basis, can help investors stay informed without being swayed by short-term fluctuations. Automating investments, such as setting up recurring deposits, aids in maintaining a disciplined and consistent investment strategy. Balancing engagement with a mindful detachment from daily market movements is key to long-term investment success.
Welcome to the Investing for Beginners podcast! Today's episode we will have a special repeat guest with us, Evans from mymoneymarathon.com to discuss everything about ETFs. We will dive into the structure of what makes an ETF different from other investments, where to research and much more so listen on!
Timestamps of the episode:
-What are ETF's and how does it differ from an index fund? [02:27]
-The things to look for when choosing the right ETF for you. [05:12]
-Best places to research on different ETF's like structure and expense ratios. [08:30]
-Why an ETF is a great way to have an exposure to a particular industry you like with less volatility and risk. [12:22]
-Risks involving in investing on ETF's and why you should be wary on "overdiversifying" [19:10]
-How to start building your own ETF portfolio for beginners. [24:29]
-The ideal number of ETFs you should own. [28:18]
-Tracking your performance in your ETF portfolio and how often you should monitor it. [34:33]
Note: Timestamps may differ and are approximate, depending on your podcast player.