Considering exchange-traded funds (ETFs)? Here are some things to consider before you shop.
Doing a little shopping for your portfolio this season? Perhaps you should consider exchange-traded funds as a lower-cost route to pursuing your investing objectives.
But before you jump in, take a moment to do a bit of window-shopping and assess the fit, style and value.
ETFs are baskets of securities that typically track a sector-specific, country-specific, or a narrow- or broad-market index and are thus considered to be passively managed (someone isn’t actively choosing which stocks to buy and sell). They list on an exchange like a stock so you can conveniently trade them through your brokerage account. And ETFs can offer some potential benefits as well:
What features do mutual funds and ETFs have in common and what are the differences? This table might help you get a better sense.
When you hit the shopping mall, say to buy a new suit, dress or pair of shoes, you likely look at three things—style, comfort and value. Shopping for an ETF involves pretty much the same considerations.
As you look through the universe of ETFs for candidates, you'll want to look at key metrics for each fund you're considering—performance statistics, ratings and expense ratios, to name a few. But it may also help to know yourself—your investing objectives, time horizons and risk tolerance. Here are a few things to consider:
The TD Ameritrade ETF Market Center provides one of the broadest collections of ETF research tools, third-party market insights/analyses, and ETF products out there. And, it's home to a newly-expanded list of 296 commission-free ETFs, which can provide you with a wide range of low-cost investment opportunities.
Carefully consider the investment objectives, risks, charges and expenses before investing. A prospectus, obtained by calling 800-669-3900, contains this and other important information about an investment company. Read carefully before investing.
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ETFs are subject to risk similar to those of their underlying securities, including, but not limited to, market, investment, sector, or industry risks, and those regarding short-selling and margin account maintenance. Some ETFs may involve international risk, currency risk, commodity risk, leverage risk, credit risk, and interest rate risk. Performance may be affected by risks associated with nondiversification, including investments in specific countries or sectors. Additional risks may also include, but are not limited to, investments in foreign securities, especially emerging markets, real estate investment trusts (REITs), fixed income, small-capitalization securities, and commodities. Each individual investor should consider these risks carefully before investing in a particular security or strategy. Investment returns will fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed or sold, may be worth more or less than their original cost. Unlike mutual funds, shares of ETFs are not individually redeemable directly with the ETF. Shares are bought and sold at market price, which may be higher or lower than the net asset value (NAV).
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Information provided by TD Ameritrade, including without limitation that related to the ETF Market Center and commission-free ETFs, is for general educational and informational purposes only and should not be considered a recommendation or investment advice.
ETFs purchased commission-free that are available on the TD Ameritrade ETF Market Center are available generally without commissions when placed online in a TD Ameritrade account. Other fees may apply for trade orders placed through a broker or by automated phone.
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Short-Term Trading Fee (Holding Period for 30 Days). ETFs available commission-free that participate in the ETF Market Center may be subject to a holding period that commences with any purchase and extends through the following THIRTY (30) calendar days. An account owner must hold all shares of an ETF position purchased for a minimum of THIRTY (30) calendar days without selling to avoid a short–term trading fee where applicable. There is no limit to the number of purchases that can be effected in the holding period. Any order to sell within THIRTY (30) calendar days of last purchase (LIFO – Last In, First Out) will cause an account owner's account to be assessed a short–term trading fee of $13.90 where applicable. For the purposes of calculation the day of purchase is considered Day 0. Day 1 begins the day after the date of purchase. The short–term trading fee may be applicable to each purchase of each ETF where such ETF is sold during the holding period. The short–term trading fee may be more than applicable standard commissions on purchases and sells of ETFs that are not commission-free.
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