Easy Way to Start Investing with Exchange Traded Funds

Published on: 2011-05-25 21:44:36

ETF ThumbFor those of you that have never invested, and mostly never bothered because you thought you needed a lot of money or were concerned about trading fees, you might be interested in looking into ETFs (or Exchange Traded Funds). Basically, they are like mutual funds but often there is no minimum purchase, and they can be traded as little or often as you like.

You generally need to purchase at least one share which generally runs between $25-50 per share. Each “share” is like a mutual fund in that it is generally comprised of hundred or more securities. For example, you often hear people tell you that you should buy a mutual fund that follows the S&P 500. Well, you can do the same thing with an ETF for that $25-50 and trade for free (well, there is something called an “expense ratio” that is VERY small).

Right now, at Schwab you can choose from about a dozen different Scwab ETFs and you can trade as often as you like, and there is no fee per trade. The expense ratio is as low as 0.06% (6 hundreds of 1 percent) for the broad market fund to 0.35% for some International ETFs. But basically you are trading absolutely free as often as you like and you can easily start investing with a budget as low as $30 or hold a few ETFs and still have only invested a couple hundred dollars.

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There are other investment firms that offer similar arrangements, and they are in somewhat of a price war right now, so it is a good time to weigh your option. Scottrade, Vanguard, and Fidelity offer similar deals as in found with Scwab. What is nice about Fidelity is you can get a 2% cashback credit card, and as you spend money at the grocery or other places, you build up money in your investment account, and you can use this money to get started.

Good luck and best wishes to all!

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