ETFs

Investors spend hours of their time deciding which stock to buy. Everybody wants to profit, and stocks giving good returns are the target. As opposed to trading individual stocks, trading ETFs (Exchange Traded Fund) allows you to invest in a wide range of shares and gives you a gestalt picture of the Australian sharemarket. Think of ETFs as trading the market in one trade.

It's important to get a good grasp of the sharemarket index before getting into the details of domestic ETFs. Domestic ETFs ride on the back of the sharemarket index. What is a sharemarket index? A sharemarket index is a measure of the performance of a group of stocks as opposed to one stock alone. The S&P/ASX 200 and All Ordinaries indices, for example, are whole market measures while the S&P/ASX 200 Utilities index is a sector measure.

International ETFs, as the name implies, allows the investor exposure to global sharemarkets. There are several reasons why investors buy international ETFs. First, the Australian market represents only a tiny chunk of the entire world's market capitalisation. Investing in international ETFs means exposure to the big kahunas of the overseas market like Berkshire Hathaway and Microsoft.

Investing in international ETFs is also much simpler than investing in individual overseas stocks. You buy these ETFs using foreign currency and you receive distributions also in foreign currency.

Anyone who is looking for an Exchange Traded Funds or ETFs to invest on would definitely do a comparison of the providers and products first. This is the most basic technical step any knowledgeable investors would do. However, it can be a little bit difficult and complicated to do this when you are contemplating on trading in American Stock Exchange and in NASDAQ because of the so many choices and options that you would have to choose from. You would have to spend much of your time with the risk that goes with the wrong choice you will make.