Reasons why you should invest in ETFs?

One of the popular choices for investment among retail investors is the Exchange-Traded-Funds (ETFs). ETFs are actually mutual funds that can be traded on the stock exchange. They invest in different securities like stocks, bonds and commodities. It gives the investors the benefit of price fluctuation on an asset.

ETFs can be considered as a combination of stocks and mutual funds. Stocks offer diversification and the mutual fund offers the ability to liquidate. They are a good investment option for beginners as well as experts.

Now investing in them has become even easier because of the trading apps. The apps offer one-click investing and you can easily and regularly invest. The online trading apps use intelligent software to recommend investment solutions. They use the top industry security methods.

Online trading app | Image Resource: investoracademy.in

Some of the top reasons for investing in the ETFs are as follows:

  • To invest in the ETFs you have to do some research on what king of the ETF you would like to invest in. It does not require expert knowledge to invest in them. Once you invest in ETFs your investment will follow the particular index your ETF is for. Your portfolio manager will make sure that the ETFs follow the index as closely as possible.
  • When you invest in the ETFs there are no hidden costs involved and their expense ratio is lower. They are passively managed and are cost-effective when compared to other funds. The money invested in the ETFs goes mostly towards investments rather than a fund manager who monitors your investments.
  • One of the main benefits of ETFs is that you can buy a collection of equity stocks and bonds in a single transaction and at a price, you can afford. Buying each stock individually will cost more. You can get access to several stocks at the cost of a single transaction.
  • One of the reasons to invest in ETFs is diversification. As  ETFs are a collection of stock and bonds they give you the advantage of diversification. These can be in different segments like pharma ETFs, PSU bank ETFs and gold, bond or currency ETFs. Investors can explore the different segments to diversify their portfolios.
  • ETFs can be easily bought or sold in the exchange. The freedom to trade them helps the investors to control their investment and reap profits. 
  • As the ETFs are easy to trade they are also easy to liquidate and there is no specific lock-in period required.

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