Investing in ETF's

Investing in ETF’s is particularly interesting for long term investors. But if you are more short term focused and love to get in and out of trades quickly ETF trading would also be a very fine option.

Why I exclusively invest in ETF’s

There are many ways of investing and  trading the markets. My own experience tells me that an investor will only be successful if one is using the right financial products that fits his or her profile. I am talking about personal characteristics here, not budgets.

A fine example is trading in options. Due to their low required investments options attract many starting investors and traders. But trading options profitably over some period of time proves to be very hard to do as option trading is much more complicated than it seems to be at first hand.

I exclusively invest in ETF’s as I found out after many years of investing that they fit my personality as an investor. It is my true belief that many investors and traders do not succeed as they have picked the wrong investment product that does not fit their personalities.

Who is best suited for investing in ETF’s?

If you are an investor who wants to make big returns with an “all or nothing” mentality then you probably have nothing to look for in ETF’s. Investing in ETF’s is perfectly suited for investors who know that short term big gains are merely fairytales but who also want to obtain a nice annual return.

Many ETF variations have been developed in the course of recent years. Here I will limit the choice to classic ETF’s that are based upon underlying assets as a group of stocks, indices or basic materials. These ETF’s are very well suited for starting investors as well as professional investors.

An ETF will go up or down with the underlying assets but not as strongly as individual shares may react. A single company may get into trouble or even go bankrupt which will have a devastating impact on your invested money.

Such losses do not occur with ETF’s as it would almost be impossible that all companies in 1 ETF would go bankrupt at the same time.

The advantages of ETF investing

With an ETF the price evolution is much quieter. An index or basic material will not go bankrupt and the risk that a complete group of companies will go down is extremely small. Of course there is always the small chance that if things turn out very badly the price of an ETF will go down sharply.

Most ETF’s move relatively slow. Increasing and decreasing may occur in small price shocks but the large movements tend to go on for weeks, months or years. Now we are getting to a very important point of notice.

ETF’s will behave just like an index or the prices of commodities, in small or larger waves. Anticipating these movements is of course the name of the game.