ETFs, More Like BFF’s

     ETFs are investors' best friends. You ask any investor their thoughts on ETF’s as a whole. you’ll get solely positive feedback about them. I mean whether you are new to investing, intermediate, or a veteran investor the backbone of your account is going to be primarily ETF’s or Closed-end Funds. So let me go in-depth about what ETFs are, a few examples, and strategies for you.

     Exchange-Traded Funds (ETFs) are a fund with multiple stocks/securities combined to create one really big value of all said stocks/securities put together. Then they are traded on stock exchanges like normal stocks.

This would mean if you buy one share of an ETF you are buying a piece of a bunch of companies. Allowing for an extraordinarily diversified portfolio, at an extremely low cost. So let me give you a few examples of ETFs and then we’ll get into some strategies.

     The SPDR S&P 500 (SPY) is a great example of an all-around spectacular ETF. it gets the owner an average 10-year return of 15.41% and has a pretty good annual dividend rate of 1.3% that pay’s-out quarterly. The SPY ETF is a very diverse fund with 507 holdings, making it a wonderful fund for diversification and great returns. ETFs generally corner specific markets for example. Spy corners the top 500 companies in America. So when you buy one share of SPY you’re buying a piece of the top 500 companies in America, technically 507 but you still get the point.

     You then have odd ETFs like QQQ. the QQQ ETF is a great investment, with an average 10-year return of 22.47% and an annual dividend rate of 0.54%. This fund has 101 holdings which means it’s a very diverse and solid investment. Here’s where this ETF becomes odd. It only invests in nonfinancial companies. Nonfinancial companies are companies that produce a product to sell like Coca-Cola, Intel, Nvidia, and many more. Compared to Financial companies who provide more of a service like Goldman Saches, BOFA, Expedia, and more. With this being said QQQ ends up leaning more towards the tech sector markets with over ½ of the ETF’s holdings being technology-based companies, but the ETF is not classified as a tech ETF.

     There are so many ETFs out there that do different things for you, invest in different companies, and each gives different returns. And ETFs are being made all the time like just a few months ago two very abnormal ETFs were released. One is BITO a Bitcoin ETF and the other is TINY a Nanotechnology ETF. So there is a whole world of ETFs to look at and explore.

     So what should you do when investing in ETFs. I’ll keep it real simple. first, your gonna invest in ETFs that cover very broad markets like SPY, QQQ, DIA, etc. Doing this will immediately make your portfolio diverse with low volatility while netting firm annual returns. Then your gonna want to pick out some ETFs that narrow in on more specific markets that will be critical in the future. Technology-based ETF’s are more volatile but get nice returns. Energy ETFs specifically clean/renewable energy, since some of our fuel sources now are becoming scarce. Some medical research ETFs would also be a good choice, once we take our focus off of COVID there are going to be some leaps in medical development over the next decades. So just as a whole invest in ETFs that you believe will benefit you over the years and invest in what you believe in. Your portfolio should also consist of a minimum of 80% in ETFs, really so you have almost guaranteed growth with low volatility. So that's the more in-depth basics with ETFs and keep in mind with investing, ETF’s will always be your BFF.