Most of us are passive investors, or at least something close to it. That’s why you probably own an ETF in your portfolio as opposed to individual stocks. For those unfamiliar, an ETF is essentially a mutual fund that you can buy and sell throughout the day. They contain a basket of stocks that are connected in some way, and they move accordingly with what stocks they are tracking. For example, the SPY ETF, which is the most traded ticker in the market, tracks the S&P 500 index. Ticker ARKK, the ETF that tracks Ark Invest’s holdings, is one of the most popular ETFs now.
2021 has been a record year so far for these unique financial instruments. 705 billion dollars have been piled into ETFs this year, which has pushed the net assets of ETFs past 9 trillion dollars. These days, there is an ETF for everything from value investing to meme stocks, which has been a result of today’s market. Still, why do people prefer ETFs over mutual funds? First, ETFs lack any investment minimum, so you can buy a fractional share instead of investing 10,000 dollars into a mutual fund. Second is because ETFs have lower fees compared to a mutual fund. Most ETFs have a small expense ratio that you pay, but mutual fund fees often charge a lot as it’s part of the model. Are you a fan of ETFs or individual stocks? Let us know in the feed what your favorite ETF is!
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.