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 online 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 browse your favorite online retailers, say to buy some new loungewear, athleisure attire, or a new 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 expense ratios.
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 an extensive list of 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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Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
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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