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Investing In ETFs

ETFs are short for Exchange-Traded Funds and they have gained extreme popularity with traders and investors in recent years for good reason. Either being a complete novice looking to invest or a financial professional, ETFs are an easy and powerful investment option to help meet your goals.

How to do it? By finding the proper online broker, of course! Here are CapitalTale’s picks for the best online brokers for every kind of ETF investor, whether you’re looking for a broker with free commissions, the broadest range of ETFs, or the best platform to help you build your way into a great portfolio.

Investing In ETFs

Interested in investing in ETFs but you don’t know where to start? No worries! We do all the “dirty” work for you. Here are CapitalTale’s picks for the best online brokers for every kind of ETF investor, whether you’re looking for a broker with free commissions, the broadest range of ETFs, or the best platform to help you build your way into a great portfolio.

Best Online Brokers For ETF Investing in 2021

Freedom24

The only European broker listed in NASDAQ

  • Get access to 1,000,000+ trading instruments
  • Invest in stocks, ETFs and bonds commission-free for the first 30 days!
  • Get exclusive ETF Investing Ideas by financial experts

*Minimum First Deposit: $0. Trading fees apply after the 30-day promo period ends. Investments in securities and other financial instruments always involve the risk of loss of capital

DEGIRO

Invest with the best discount broker in EU

  • Extremely low commissions
  • No min. deposit, inactivity or withdrawal fee
  • List of commission-free ETFs each month!

*Minimum First Deposit: $0. Fees apply. Investments may produce profit for you, but they also involve the risk of losing your capital.

ETFs are short for Exchange-Traded Funds and they have gained extreme popularity with traders and investors in recent years for good reason. Either being a complete novice looking to invest or a financial professional, ETFs are an easy and powerful investment option to help meet your goals.

When you’re looking for the provider that is most suitable for your needs, it is ideal that you choose a broker that offers a variety of instruments in case you decide to diversify your portfolio in the future. Like stocks, many brokers now offer ETFs commission-free. Besides commissions, it’s also important to consider other criteria, including a broker’s fund selection and tools for creating a well-diversified portfolio.

In case you are having a hard time finding the perfect option for you…no need to worry. We do it for you!

What Is An ETF?

An ETF is actually a type of investment fund that aims to track the performance of a specific stock market index, an industry sector, or an asset. Think of it as a “basket” that includes various investment products such as stocks, bonds, etc., and just like stocks can be bought or sold on a Stock Exchange at any point during market hours. 

Simple, transparent, and cost-effective, they offer a straightforward way to gain exposure to a wide range of assets including stocks, bonds, commodities, and real estate.

How does It work?

By buying an ETF you take ownership of the entire “basket” of underlying investment products that it includes. If, for example, you buy an ETF that follows the S&P 500 index then you get a small chunk of America’s 500 largest companies. ETFs are a type of investment that offers the best attributes of two popular assets: They have the diversification benefits of mutual funds while mimicking the ease with which stocks are traded.

ETFs vs Stocks

Just like stocks, ETFs can be bought and sold whenever the market is open. Yet, ETFs are more diverse than investing in individual stocks. Instead of buying a handful of individual stocks, by investing in an ETF, you would get exposure to a multitude of stocks. Let’s say, for example, that you want to invest in Amazon stock. Then the performance of your portfolio completely depends on the performance of this individual stock. So in case, Amazon’s value takes a turn for the worse, so will your portfolio. Instead, if you invest in an ETF that tracks the S&P 500 index (which includes Amazon stock), then a fall of Amazon stock would not affect your entire portfolio. The other stocks included could balance out any potential loss. ETF gives you instant diversification with one simple trade. And you’ve left with reduced risk while maximizing returns. 

ETFs vs Mutual Funds

Just like mutual funds, ETFs are a basket of stocks, bonds, or other assets. In the case of managed funds, a fund manager actively manages and invests money into a basket of different assets and securities – often stocks. You pay the manager in the hope they drive better performance than the market performance. But this is not the case with ETFs.  They are usually lower-cost compared to managed funds. This is because ETF investments don’t need a fund manager. They follow a passive management scheme. ETFs will leave you with no surprises because you know a good ETF will aim to closely match the performance of the underlying index that it invests in. 

💡 Keep in mind: Most ETFs are passively managed, which means the ETF is designed to track a benchmark index, such as the S&P 500. But some ETFs can be actively managed by a professional money manager who picks and chooses the investments.

Pros & Cons Of ETFs

ETFs, combine the flexibility of stock trading with the instant diversification of mutual funds. As most ETFs are passively managed, since they track a benchmark index rather than trying to beat market returns, management fees are on average about one-third lower than that of actively traded mutual funds. Costs are transparent, and they make accessing markets easy. There is usually an ETF for whatever you are looking to invest in, from a country in Southeast Asia to an asset class like global bonds—and even commodities like gold.

On the other hand, the passive management scheme that most ETFs follow may be a turnoff for investors who prefer active management. Also, while costs are generally lower for ETFs, they can vary from fund to fund (even ETFs tracking the same index).

Pros

They’re low cost

Instant diversification benefits

Access to many stocks across various industries

They are transparent

They are easily traded

Cons

❌ Passive management possible turnoff for some investors

❌ Actively managed ETFs have higher fees

❌ Less exciting if you are a trader

Which Types Of Investors They Address?

Hands-off Investors: ETFs is a suitable investment tool for hands-off investors who don’t want to put much effort into maintaining their investment. But they’re still looking for an easy way to invest and potentially grow their money. Investing doesn’t have to be complicated or require you to be monitoring the market closely.  Investing in ETFs can make your money do more for you without dealing with the relative complexity of many traditional investment products.

Long-term Investors: ETFs are great investment vehicles for long-term buy-and-hold investing.  They are known for being “set it and forget it” types of investments. All you have to do is invest regularly and leave your money alone. The fund will take care of the rest without you having to lift a finger. So if you are one of those who have long-term investment horizons (10, 20 to 30 years) then probably ETFs are the most suitable investment option for you. If, on the other hand, you are a type of investor who seeks to benefit from short-term market fluctuations, then definitely ETFs are not for you.

Low-Risk Investors: All forms of trading and investing involve some degree of risk, and ETF trading and investing are no different. However, compared to holding individual stocks, experts say index ETFs are much less risky since they provide efficient diversification. That’s what makes ETFs a possible “safer” form of investment compared to other investment options. So, for those who wish to minimize the risk on their portfolios, ETFs are a perfect choice.

How To Buy ETFs

ETFs have a lot of great things about them. They are great for first-time investors or anyone who has some extra cash to set and forget for a while. Nowadays, thanks to automatic investing, investors can find several options to program trades automatically and enjoy reinvesting funds without having to lift a finger.

So before choosing your preferred ETF broker, it’s a good idea to think about two things – your goals, and your budget. The broker you choose will determine which ETFs you’ll be able to trade, the tools you’ll have access to, and the fees you’ll pay per trade. Deciding which trading platform is right for you can be difficult, but we’re here to help. We’ve reviewed some of the best ETF trading platforms available right now so that you can determine which one to start trading with.

So, what are you waiting for? Take your pick from one of our top brokers, choose a top-rated ETF, and potentially watch your money grow. 

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