Beginner's guide to ETFs

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The Handler

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Hi guys,

Having done some initial research, I'm looking to begin my trading career by investing in ETFs.

They seem to offer the liquidity, low transaction costs and diversified risk that I'm after.

Before I take the plunge, however, I was wondering if anyone had any advice on any aspects of what I'm about to do: including the platform I should use, which ETFs I should invest in etc.

I'm still unclear as to how I go about buying ETFs, which shows I'm probably not it in a position to get going!

By way of background, I will initially be investing a small amount until I get comfortable with the process. If all goes well, I would like to start managing all my assets to avoid paying my fund manager's costly commission fees! I'm of the school of thought that unless you have exceptional skills or knowledge, you can't beat the market long term.

Thanks in advance for any help.
 
The Handler said:
Hi guys,

Having done some initial research, I'm looking to begin my trading career by investing in ETFs.

They seem to offer the liquidity, low transaction costs and diversified risk that I'm after.

Before I take the plunge, however, I was wondering if anyone had any advice on any aspects of what I'm about to do: including the platform I should use, which ETFs I should invest in etc.

I'm still unclear as to how I go about buying ETFs, which shows I'm probably not it in a position to get going!

By way of background, I will initially be investing a small amount until I get comfortable with the process. If all goes well, I would like to start managing all my assets to avoid paying my fund manager's costly commission fees! I'm of the school of thought that unless you have exceptional skills or knowledge, you can't beat the market long term.

Thanks in advance for any help.
Click to expand...

You shouldn't invest in anything at all without knowing for yourself, is this a lul thread? Dunno how much you have to play with but I can't see much point in ETF or stocks with less than 10G and even then it will be a long road to a decent profit but what do I know as I reckon 100,000 is more like the capital needed to make anything decent from stocks & ETFS while being able to trade according to a plan with risk reward mm all set out an that, unless you find the next smack donalds or microsoft invest you full ten g then wait ten years and be a millionaire!
All the best
 
Last edited:
LittleKnown said:
You shouldn't invest in anything at all without knowing for yourself, is this a lul thread? Dunno how much you have to play with but I can't see much point in ETF or stocks with less than 10G and even then it will be a long road to a decent profit but what do I know as I reckon 100,000 is more like the capital needed to make anything decent from stocks & ETFS while being able to trade according to a plan with risk reward mm all set out an that, unless you find the next smack donalds or microsoft invest you full ten g then wait ten years and be a millionaire!
All the best
Click to expand...

Thanks for your thoughts LK.

I would initially be investing about 10G and would then increase it if all goes well and I get comfortable with how it works.

If I didn't opt for ETFs, what would you suggest?

I am not looking to actively trade, more a buy and hold style.
 
The Handler said:
Thanks for your thoughts LK.

I would initially be investing about 10G and would then increase it if all goes well and I get comfortable with how it works.

If I didn't opt for ETFs, what would you suggest?

I am not looking to actively trade, more a buy and hold style.
Click to expand...

Sorry for the ****ty post to start off, buy and hold and all that jazz is over my head, maybe look at value investing and look into what buffet does, also P/E and all that, I read a bit about this type of trading in Neatest Little Guide to Stock Investing and he gives a template of what to look for when buying and holding, seems relevant to what you wanna know, was gunna suggest mister charts thread but if you don wanna be active then there would be no point, so my 100k suggestion may be a bit out of proportion as I think mr c uses less but I am clueless as I kinda gave up trying to learn out from here a while ago.
Good luck though, hope you find what you are looking for;)
 
The Handler said:
Hi guys,

Having done some initial research, I'm looking to begin my trading career by investing in ETFs.

They seem to offer the liquidity, low transaction costs and diversified risk that I'm after.

Before I take the plunge, however, I was wondering if anyone had any advice on any aspects of what I'm about to do: including the platform I should use, which ETFs I should invest in etc.

I'm still unclear as to how I go about buying ETFs, which shows I'm probably not it in a position to get going!

By way of background, I will initially be investing a small amount until I get comfortable with the process. If all goes well, I would like to start managing all my assets to avoid paying my fund manager's costly commission fees! I'm of the school of thought that unless you have exceptional skills or knowledge, you can't beat the market long term.

Thanks in advance for any help.
Click to expand...

ETF's trade like any other stock, you buy and sell them through a broker in the same way. My advice would be to stick with Physical replicating ETF's and avoid synthetic (swap based), leveraged (2x, 3x) or inverse ETF's.

It might be a good idea to trade index ETF's like the ishares (ISF) which replicates the FTSE100, I say this because many discussions in this forum are about the performance of indices. There are also Physical Gold and Silver ETF's (precious metals are becoming popular).
 
new_trader said:
ETF's trade like any other stock, you buy and sell them through a broker in the same way. My advice would be to stick with Physical replicating ETF's and avoid synthetic (swap based), leveraged (2x, 3x) or inverse ETF's.

It might be a good idea to trade index ETF's like the ishares (ISF) which replicates the FTSE100, I say this because many discussions in this forum are about the performance of indices. There are also Physical Gold and Silver ETF's (precious metals are becoming popular).
Click to expand...

Thanks New Trader.

I've now signed up to OptionsXpress where there are a bundle of ETFs. On the back of your recommendation, I hunted down (but haven't yet bought) some Barclay's Ishares titled:

iShares MSCI United Kingdom Index

which seem to have exposure to the FTSE 100 companies.

There do, however, seem to be many more options. I chose Barclay's ishares purely because of the reputable name. Is it worth hunting around some more?
 
The Handler said:
Thanks New Trader.

I've now signed up to OptionsXpress where there are a bundle of ETFs. On the back of your recommendation, I hunted down (but haven't yet bought) some Barclay's Ishares titled:

iShares MSCI United Kingdom Index

which seem to have exposure to the FTSE 100 companies.

There do, however, seem to be many more options. I chose Barclay's ishares purely because of the reputable name. Is it worth hunting around some more?
Click to expand...

I like iShares because the majority of their ETF's are physical and replicate rather than optimise an index. If you are interested in commodities then take a look at etf securities:

http://www.etfsecurities.com/

They do physical precious metals and physical industrial metals.

http://www.etfsecurities.com/en/securities/etfs_physical_exposure.asp
 
LittleKnown said:
You shouldn't invest in anything at all without knowing for yourself, is this a lul thread? Dunno how much you have to play with but I can't see much point in ETF or stocks with less than 10G and even then it will be a long road to a decent profit but what do I know as I reckon 100,000 is more like the capital needed to make anything decent from stocks & ETFS while being able to trade according to a plan with risk reward mm all set out an that, unless you find the next smack donalds or microsoft invest you full ten g then wait ten years and be a millionaire!
All the best
Click to expand...

What is a "lul thread"?
 
All ETFs are not created equal. If you are going to be day trading ETFs, there's not much to learn. My presumption is you are not going to be doing that.

So - the first step is to understand the different ways the products are structured, for example ETFs & ETNs aren't the same at all. They have different risk profiles (ETNs are more risky), they have different tax profiles too.

There's a good book called "The ETF Book" which explains all the types and the different tax implications of each type.

If you intend to buy commodity based ETFs that go out & buy Futures contracts, then you also need to understand the way the underlying futures contracts work and how they roll from one month to the next. You also need to understand concepts such as contango and backwardation because the returns on a commodity based ETF is going to be impacted by this as much as it is by the price in the underlying.

In terms of investing in a commodities through ETFs, there may be more merit in buying an ETF that (for example) invests in Gold companies than Gold futures.

You need to understand the fees & dividends too.

I'd get the book I mentioned. It's got all the info you need.
 
DionysusToast said:
All ETFs are not created equal. If you are going to be day trading ETFs, there's not much to learn. My presumption is you are not going to be doing that.

So - the first step is to understand the different ways the products are structured, for example ETFs & ETNs aren't the same at all. They have different risk profiles (ETNs are more risky), they have different tax profiles too.

There's a good book called "The ETF Book" which explains all the types and the different tax implications of each type.

If you intend to buy commodity based ETFs that go out & buy Futures contracts, then you also need to understand the way the underlying futures contracts work and how they roll from one month to the next. You also need to understand concepts such as contango and backwardation because the returns on a commodity based ETF is going to be impacted by this as much as it is by the price in the underlying.

In terms of investing in a commodities through ETFs, there may be more merit in buying an ETF that (for example) invests in Gold companies than Gold futures.

You need to understand the fees & dividends too.

I'd get the book I mentioned. It's got all the info you need.
Click to expand...

Could you please mention the name of the author of the book "The ETF Book" ?
 
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