Looking at Exchange Traded Funds

When looking for investment options, you might want to consider exchange-traded funds (ETFs). ETFs are a smart way to invest because they offer diversification at relatively low costs. However, there are always downsides to every money move. It’s important to consider both the pros and the cons. Here’s a breakdown.

Pros of ETFs

• Diversification. When you choose ETFs, you are investing in a wide variety of assets. One ETF can cover a group of stocks and bonds.

• Lower risk. That diversification means you are facing lower risk. When your money is spread across a variety of segments, you don’t have to panic if things go south for a few investments.

• Easy to track. ETFs are traded just like stocks, so it’s easy to check in on them. You can get yourself set up with ETFs through a brokerage account or a retirement account.

• Lower management fees. ETFs are passively managed, so fees are typically lower than mutual funds.

Cons of ETFs

• Lower returns. Because ETFs are generally less risky than stocks, the return on ETFs can be lower.

• Less personalization. ETFs are pre-selected funds, so you don’t get to pick which stocks or bonds you’re going to be tied to. If you like tinkering, ETFs might not be for you.

• Fees. Even though ETFs are usually passively managed, they still have fees. Be sure to research these costs, as they will cut into any returns that you make.