Trading Essentials: Roger Scott Shares Everything You Need to Know About ETFs
An ETF, otherwise known as an exchange-traded fund, is a type of stock that very much functions as a group of stocks. There are many benefits to buying ETFs over individual stocks, and many people will choose to have both in their portfolios.
There are many things investors should know about ETFs, and only an expert can truly explain them all. Luckily, I know an expert! I spoke with Roger Scott, the lead trader at Wealthpress, and asked him to explain everything an investor needs to know about ETFs.
He agreed, so now I’m going to share exactly what Roger Scott had to say!
What is ETF?
Roger Scott shortlisted the ETF for me so I can give you a quick summary. Almost like an ETF is a stock that you can buy, but you’re not buying the stock of any one company. Instead, you are buying a stock that represents a small share in several companies.
ETFs can hold different percentages of many companies. Most ETFs will have a specific industry or product that it is targeting. For example, there is an ETF for social media stocks; There is usually one for tech, AI ETFs, etc. There is an ETF for just about everything you can think of.
safer than stock
One of the main advantages of an ETF is that it is much safer than regular stocks. If you buy stock of a business and it performs poorly, your investment will lose money.
Now, if you buy an ETF that contains several different businesses, and one of them performs poorly, your ETF will not necessarily go down. If any other stock in the ETF outperforms, it may go up as well. Roger Scott highly recommends ETFs for those who want to invest but don’t have the time to research and do the due diligence for individual stocks.
low risk, low reward
Roger Scott emphasized that while ETFs are less risky than stocks, they will also offer lower rewards if the stock does well. For example, if you invest in Apple, and Apple’s stock skyrockets, you’ll see great gains.
On the other hand, if you invest in an ETF that has Apple and another company that isn’t performing so well, your profits won’t be as high because the other company will hold your ETF down.
long term hold
When it comes to ETFs, Roger Scott believes in the old phrase, “time to market beats time to market.” ETFs are great for the long termLow-maintenance portfolios, which is why so many people rely on them for their retirement accounts.
ETFs are not something that most people would buy and expect a huge jump in within the year. They are something you buy when you believe in the industry or market you are buying in and think it will grow in a few decades.
Finally, like most professional traders and investors, Roger Scott I believe a diversified portfolio is the way to go. ETFs can tank just like any other stock in the market.
Once its bubble bursts, you can still lose money buying more inflated ETFs. That’s why it’s still important to do research and listen to the pros. A balanced portfolio will contain both ETFs and stocks.