ETFs
Exchange-traded baskets that give instant diversification at low cost.
An ETF holds a basket of securities and trades on an exchange like a single stock. Expense ratios on broad index ETFs are often under 0.10% per year.
An ETF holds a basket of securities and trades on an exchange like a single stock. Expense ratios on broad index ETFs are often under 0.10% per year.
Watch the underlying index, the expense ratio, the bid-ask spread and the tax treatment before buying.
Key concepts to master
- 01.Total cost of ownership, including fund fees and platform fees
- 02.Liquidity: when, and on what terms, you can get your money back
- 03.Tax treatment and which account type this belongs in
- 04.How this exposure overlaps with what you already own
Common mistakes
- ×Sizing a position based on recent performance rather than a written plan
- ×Confusing infrequent valuation with genuine stability
- ×Ignoring the tax drag of frequent trading in taxable accounts