Considering exchange-traded funds (ETFs)? Understand fit, style, and value before you shop.
Doing a little shopping for your portfolio this season? Perhaps you should consider exchange-traded funds (ETFs) as a potentially lower-cost investment for pursuing your investing objectives.
But before you jump in and start to pick ETFs, 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. (In other words, someone isn’t actively choosing which stocks to buy and sell.) They’re listed on exchanges just like stock, so you can conveniently trade them through your brokerage account. Keep in mind that the risks you face when trading equities are the same risks that you face when trading ETFs. And ETFs can offer some potential benefits:
When you hit the shopping mall, say to buy a new suit, dress, or pair of shoes, you likely look at three things—comfort, style and value. Shopping for an ETF involves pretty much the same considerations. Here are some ideas of what you may want to consider when looking for an ETF.
As you look through the investment universe to find the best ETF candidates for you, 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:
As you pick ETFs, first determine what you’re investing for.
Do your research.
Be mindful of fees.
Ready to start your search for the best ETFs for you? TD Ameritrade clients can start with the TD Ameritrade ETF Market Center, which provides a broad selection of ETF research tools and third-party market insights/analyses. And, it’s home to a list of more than 300 commission-free ETFs, which can provide you with a wide range of potentially 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).
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.
Particular commission-free ETFs may not be appropriate investments for all investors, and there may be other ETFs or investment options available at TD Ameritrade that are more suitable.
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.
TD Ameritrade receives remuneration from certain ETFs that participate in the commission-free ETF program for shareholder, administrative and/or other services.
No Margin for 30 Days. Certain ETFs purchased commission free that are available on the TD Ameritrade ETF Market Center will not be immediately marginable at TD Ameritrade through the first 30 days from settlement. For the purposes of calculation the day of settlement is considered Day 1.
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