ETF advantages

ETF stands for ‘exchange traded fund’ and is a stock that reflects an index. There can be several different ETF’s that track the same index. It is worth noting that ETF’s can also follow real estate, bonds and gold etc. However the most popular ETF’s follow index’s.

An example ETF would be SPY which follows the S&P 500. If the S&P 500 went up 1% then its ETF (SPY) would also go up by around 1%.

The idea of ETF’s is to allow people to trade the market as a whole and not just an individual company.

Continue reading to learn about the advantages of trading ETF’s, some of the notable ones around today and how you can start trading them for yourself.

ETF advantages

• they are less prone to erratic price movements. This is because you are trading the market as a whole, and not just an individual company (whose bad earnings report could make a major impact to its share price).
• they are very liquid so you can buy and sell them quickly.

There are also ETF’s that double whatever the index does. An example is DDM which will go up around 2% if the Dow Jones 30 went up by 1%. These ETF’s can provide very powerful investment vehicles and are often used by day traders looking for large quick profits.

Notable ETF’s

Some popular ETF’s are:

DIA – Follows the Dow Jones 30
QQQ – Follows the NASDAQ composite
SPY – Follows the S&P 500

Some ETF’s that double what the index does are;

DDM – Doubles what the DIA does (ultra long)
DDQ – Short doubles what the DIA does (ultra short)

QID – Short doubles what the QQQ does (ultra short)
QLD – Doubles what the QQQ does (ultra long)

SDS – Short doubles what the SPY does (ultra short)
SSO – Doubles what the SPY does (ultra long)

Start trading ETF’s today!

Stop reading about trading ETF’s and get some hands on experience by trading some ETF’s! We always recommend you give it a go by opening up a free practice account today. There’s no risk because you can use virtual money before moving onto real money.

Or if you are already confident enough to use real money, open up a brokerage account!

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