ETF Investing

How does one go about ETF investing?

All you really need to invest in ETF's is a stock broker that will sell you stocks. You buy ETF's just like you would buy a stock - make a bid or set a market order. Once your order is matched by a seller, you own that many shares of the ETF. To make ETF investing worth it, you need a broker that will make trades for very little or even free because it is usually more cost effective to use the corresponding no load mutual fund or index fund.

I used to use Zecco to invest some non-retirement money into ETF's because they gave 10 free trades per month. They changed their policy to where now you must have holdings greater than $25,000 to get 10 the free trades and I didn't want to put that much into a stock broker. By not putting a lot of money into a stock broker, I help protect me from my natural desire to speculate. They've already increased the free trades account minimum balance once before, so I can't entirely trust them to not do it again. But, if you have $25,000 or more to invest in non-retirement and you can resist buying single stocks, then buying exchange traded funds through Zecco would be a cost effective option.

Which ETF's should I invest in?

I like Yahoo Finance ETF Center (new window) to research exchange-traded funds. Its easier to find fund data than MSN money. Once you have selected an ETF that you are interested in, click on "Profile" on the left side. Then scroll down and look under "Fund Operations" for "Total Expense Ratio."

The expense ratio is the most important ETF number to look at. The lower, the better. The mutual fund industry is not a place where "you get what you pay for." In fact, there is a lot of evidence to suggest the opposite - the more you pay, the less you get. Thats why I love index ETF's. I recommend going straight to the Vanguard ETF's (new window).

return from etf investing to index funds

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