- One of the biggest advantages of ETFs over mutual funds is the fact that ETFs can be purchased and sold in real time during the trading day. That means you can use a limit order to buy or sell the ETF at a set price, reducing your risk even further. But in order to get the most from this strategy, it is important to keep your costs as low as possible. One of the best ways to achieve that goal is to open an account with a discount broker like Scottrade or TD Ameritrade. These brokers can get your cost per trade down to as low as $7--meaning that you will have that much more money to invest.
- ETFs are the perfect way to achieve instant diversification, but not all ETFs are created equal. In order to achieve the greatest level of diversification, investors should consider placing at least a portion of their stock market holdings in broadly diversified funds like the Standard & Poor's 500 tracking ETF, trading under ticker symbol SPY, or the even more broadly diversified VTI, which tracks the performance of the total stock market.
- Even though investing in the American stock market is a great place to start, it should not be the sum total of your stock market holdings. By diversifying your investments around the world you can spread the risk even further and participate in the growth of the entire world. One of the best ways to invest in the world at low cost is to choose the ETF that trades under ticker symbol VEU--this fund invests globally while avoiding investments in the United States. That makes VEU an excellent complement to U.S.-centered funds like SPY and VTI.
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