As an investor, you know that diversifying your portfolio is vital to successful investing. One of the best ways to do this is by investing in ETFs – Exchange Traded Funds. Not only are ETFs an intelligent way of spreading out risk and reducing volatility, but they also give you greater control over what asset classes you want to include in your investment strategy and how much exposure each gets.
With so many benefits on offer, it’s no surprise that investors from all backgrounds choose to invest in these funds more than ever before. In this article, we will explore eight compelling justifications for why now might be the perfect time for you to try investing in ETFs for yourself.
Cost efficiency
An ETF is one of the most cost-efficient ways to invest your money and maximise returns for a long-term strategy. Unlike buying individual stocks, ETFs allow investors to spread their risk by buying small portions of hundreds, even thousands, of different stocks or investments related to commodities, bonds, or foreign stocks – all at a fraction of the cost.
Since you benefit from the economic gains of all these investments within the ETF portfolio and only have to pay one commission fee when you buy, this makes it easier and cheaper than investing separately in individual stocks – without compromising diversification. For instance, Saxo Dubai Markets has a range of ETFs with commission fees starting from as low as 0.005%.
Diversification
ETFs provide investors with a more accessible and cost-efficient way of diversifying their portfolios. You can spread your risk by investing in various asset classes, such as equities, bonds, commodities, and currencies.
The ability to invest in multiple different markets across the globe also reduces the risk associated with putting all your eggs in one basket, such as investing solely in the stock market of your home country. Investing in an ETF gives you global exposure to many different markets and asset classes to spread out your risk for greater security and peace of mind.
Liquidity
ETFs are highly liquid and trade on stock exchanges like any other security, meaning you can buy or sell whenever the market is open. It makes it easy for investors to adjust their strategy quickly if they need to take advantage of changing conditions.
It also means that investors can easily access their funds at any time if they need to, making ETFs an excellent choice for investors who want an investment that is both stable and liquid.
Low minimum investments
ETFs have a low minimum investment requirement, which makes them attractive to investors who are just starting and don’t want to invest too much at once. It also makes ETFs great for those who prefer smaller investments with the potential for high returns over time.
The lack of high entry costs associated with ETFs means that they are an excellent choice for those who want to test the waters of investing without spending too much money – making them an accessible option for all kinds of investors.
Tax benefits
ETFs offer a unique tax advantage over traditional mutual funds as they are not subject to the same capital gains taxes as other investment vehicles. It makes ETFs an excellent choice for anyone who wants to reduce their taxable income and maximise returns without sacrificing diversification.
The way ETFs are structured also means that taxes can be deferred until you are ready to take out your money, so you don’t have to worry about paying taxes on gains until you decide to exit the investment – making them a smart choice for long-term investors.
Professional portfolio management
ETFs are professionally managed diversified portfolios, so you can trust that your money is in safe and competent hands. ETFs also allow investors to take advantage of the strategies and expertise of experienced portfolio managers – meaning they don’t have to be financial experts themselves to benefit from investing.
Investors can access a wide range of portfolios with different levels of risk and returns, allowing them to select the one best suited for their individual needs – without having to take on the hassle of managing a portfolio themselves.
Transparent fee structure
ETFs offer a transparent and cost-effective fee structure much lower than other investment vehicles. The low fees associated with ETFs mean that investors can keep more of their returns rather than paying high charges for management or trading costs.
The cost savings associated with ETFs make them an attractive option for those who want to keep more earnings and maximise their potential returns.
Accessibility
ETFs are incredibly accessible, meaning you don’t need a large amount of money to start investing in them. As they trade on stock exchanges, ETFs can be bought and sold just like any other security – making them an attractive option for investors of all levels.
The ease of access also means that investors don’t have to worry about complicated paperwork or long waiting times, as most ETFs can be bought and sold within minutes – making them an excellent choice for anyone who wants to start investing quickly and easily. These are just some of the many reasons investing in ETFs can benefit investors.