Buying ETFs – low fees, high returns and minimal risks?
ETFs are exchange-traded index funds that enjoy great popularity due to their many advantages. Investors have put over 4 trillion US dollars into exchange traded funds worldwide, in the hope that they will be rewarded with high returns. We will provide you with an in-depth explanation of how the index funds work, what advantages they hold, how to buy ETF, and which online brokers (top 10 brokers) you should go with.
What are exchange traded funds?
ETFs are passively managed funds and reflect the performance of a specific stock index. As the funds copy the value of an index one-to-one, investors benefit from price developments without having to go through the laborious process of buying the shares individually.
The most important indices represented by ETFs are the MSCI World Index, the German DAX, the Dow Jones and the S&P 500. In the case of DAX, the stock index comprises 30 securities from the largest listed companies in Germany.
ETFs can be sold and resold flexibly on the stock exchanges at any time. Just as with securities trading, investors only need a little capital and an online account. The easiest way for traders to trade in ETFs is via an online broker (top 10 brokers) .
What are the features, advantages and risks of ETFs?
An ETF is passively managed and differs significantly from actively managed investment funds. In these type of investment funds, experienced experts select the individual components of each investment, all while charging a very high fee for the privilege. Despite this, it was often the case in the past that the returns of actively managed funds were still below the gain in value of passive exchange traded funds.
Due to the low fees, the possible high returns and ease of trading, numerous analysts and investors prefer ETFs over other investments. Experts always advise investors to minimise risk by spreading their capital . With ETFs, the whole process is actually an automatic one: since index funds consist of several securities, investors benefit from effective risk diversification.
Note: Poor performing stocks are offset by securities with rising market prices.
Buying ETFs – how it works in 3 steps
ETFs can be bought and sold like shares. Trading can be done via banks/savings banks and online brokers (top 10 brokers). Online providers have lower costs than physical banks, and they pass this saving along to their customers. This makes trading through an online broker a favourable endeavour.
- Register with a broker and open an online account.
- Launch the trading software or log into the web platform
- Enter purchase data and the ISIN (International Securities Identification Number) of the ETF, then place an order.
If you want to buy an ETF that tracks the Dow Jones Industrial Average (ISIN: 969420), you do not have to acquire 30 securities (Microsoft and McDonald’s etc). Instead, acquire yourself an ETF stake that tracks all stocks on the Dow Jones index.
Important: When the share prices rise, so too does the value of your ETF stake, and vice versa.
Tips and recommendations when buying ETFs
You can get an ETF account with most online brokers (top 10 brokers) free of charge. When it comes to purchasing ETFs, the one-time costs (order costs) involved are maximum 0.25 percent. The ongoing fees are also equally moderate and lie between 0.10 and 0.50 percent annually. Make sure to compare the fees of the various online brokers. The more you trade in ETFs, the more important this criterion becomes. Don’t forget to also look closely at the trading platforms and the number of tradable ETFs.
Before purchasing ETFs, make sure to be mindful of the current price, the fund volume, the volatility (price fluctuations), and how high the fees are!
✅ there are a lot of ETFs available for not a lot of money
✅ from time to time, online brokers offer free ETFs
✅ with ETF savings plans, you can build up long-term assets
>>> To the best ETF brokers <<<
Which ETF broker is the best?
Most investors trade ETFs via an online broker. The large selection of providers available can be a headache, especially for newcomers. Before you open an account with an online broker, you should read up on their one-time and ongoing fees, the ETFs they offer, and their trading software. Many brokers provide interested parties with a free “demo account”. This grants you a detailed and risk-free insight into ETF trading.
Please make sure you only choose a serious and safe provider, such as 24Option. The renowned company is very experienced and highly regarded. You will benefit from a large selection of exchange traded funds and can trade on advantageous terms. 24Option’s trading platform is sure to win you over with its intuitive operation and many practical functions.
Experience shows: 24Option is among the best ETF brokers.