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Why you should consider investing in ETFs

by , 25 February 2015

If you want to invest on the stock market, but you're not comfortable picking individual shares, you have an option.

You can invest in exchange traded funds (ETFs) instead. These funds represent a basket of shares, which varies depending on the focus of the fund.

So why should you look to invest in ETFs?

Read on to find out…

ETFs offer diversification

Investing in shares is risky. If you invest in a number of different shares across a number of different sectors, you reduce your overall risk.

Your portfolio is less likely to suffer if one of your shares take a tumble.

But if you feel you don’t have the expertise to pick individual shares or the cash to build a diversified portfolio, you can invest in ETFs instead.

By investing in ETFs you benefit from the diversification it brings with you.

Investing in ETFs means you can gain exposure to:

  • The Johannesburg Stock Exchange’s biggest companies;
  • Particular sectors of the stock market;
  • International shares;
  • Commodities; and
  • Property, to name a few.

ETFs remove company-specific risk

What’s great about investing in ETFs is that you don’t have the risks that come with investing in a single company.

Investing in ETFs requires a bit of research though. Once you’ve found a fund you’re interested investing in, watch for pull backs in its price before buying.

The lower the price you get in at, the higher your potential for future gains.

You could even build a diversified portfolio of just ETFs. You could include the country’s biggest companies; different sectors such as property, resources and industrials; international markets; bonds; and precious metals, such as platinum and gold.

So there you have it, why you should consider investing in ETFs.

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Why you should consider investing in ETFs
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