THINK DIFFERENTLY
The five important things to think about when investing in ETFs are helpful guidelines, but they shouldn't be the only factors you consider. You should also look at other things like the ETF company, how big and experienced they are, their track record, and how committed they are to the ETF industry. All of these factors together are really important when making your decision.
1) Measure performance
When we talk about how well an ETF is doing, it's not just about how much money you make or lose as the market goes up or down. It's also about how closely the ETF follows the ups and downs of the index it's based on.
Even though an ETF usually moves similarly to the index it follows, it doesn't match exactly. This is because managing the ETF involves some costs, and these costs can affect how well the ETF performs.
2) Know the ETF’s index
With so many indexes available for investing, how do people choose? Financial experts can assist by understanding the investor's goals and why they want to use an ETF.
To figure out how an ETF fits into a portfolio, look at these examples to see how it could be used.
Getting access to investments in specific countries, regions, and around the world.
Investing in industries that you find interesting, like technology, telecommunications, renewable energy, or consumer goods.
Getting the chance to invest in specific types of assets like stocks, bonds, real estate, commodities, and more.
3) Consider the ETF structure
Two types of ETF structures
The way an ETF is set up is important because it can impact how risky it is and how much it costs to manage. Although physical ETFs are widespread, it's crucial to grasp the ETF's structure and choose the one that suits an investor's requirements.
4) Know when to trade
People like using ETFs because they can be bought or sold on the stock market, just like stocks. You can trade an ETF anytime the stock market is open, which is more flexible than mutual funds that only trade once a day, usually at the end of the day. This flexibility is appealing to investors because it allows them to adjust their investments when needed, taking advantage of opportunities.
Trading tip:
Markets can be more volatile near the open and close of trading hours. Consider trading ETFs after the first and before the last 20 minutes of the trading day.*
5) Understand the costs
When dealing with ETFs, there are two types of costs to consider: transaction fees and the fund's expense ratio. Transaction fees happen when you buy or sell an ETF, and the fund's expense ratio is a yearly calculation.
HOW TO BUY AND SELL ETFs
If you're a financial professional, you can reach out to brokers to talk to a BlackRock expert about how the fund is invested and get advice on making trades.
If you're investing on your own, you can team up with a financial professional to plan your investments and figure out how to include iShares ETFs in your portfolio. Alternatively, you can invest directly through an online brokerage account.
EXECUTING THE TRADE
When making a trade, it's crucial to look for price protection, especially when the market is unpredictable. Using limit and stop-limit orders can help with this.
The chart below explains the various types of orders you can use when making a trade, how to decide which one is best, and the possible downsides of each.
