How to invest in EFT in 2023?

This time we are going to talk about listed investment funds, also known as ETFs, so you can learn how they work and above all, know if investing in ETFs is a good option for you.

What are EFTs?

Before analyzing the advantages of investing in ETFs, it is important to understand their concept, in order to apply it. In Spanish we know them as traded funds and today they have grown so much that there is a great diversity that allows us to invest in different ETFs.

An ETF is an investment fund that replicates the evolution of an index. This is a set of actions, which replicate the index on which it is based.

Today there are a large number of ETFs, as many as indices in the market, since you can replicate each one of them.

ETFs no longer just track stock indices, but also stocks, commodities, and currencies around the world.

Types of EFT

Because there are a large number of types of ETFs, we can divide them according to the type of index they replicate, their global fixed income, their market, and equities.

Today there are more than 7000 ETFs worldwide, so it is extremely necessary to divide them to understand their types and how they work.

The division that we will make today will be based on the types of indices that replicate in order to understand them.

Equity ETFs (Stock ETFs)

This type of ETFs replicate the indices of the world stock markets.

sector ETFs

These correspond to variable income ETFs, and replicate indices of specific business sectors.

These ETFs replicate raw materials, technologies, the real estate sector, infrastructures, among others.

Value ETFs and Growth ETFs

These correspond to the different management styles of the indices they replicate, among them are: ETF Growth and ETFs Value.

Fixed Income ETFs (Bond ETFs)

These replicate a group of bonds also according to their fixed income, which can be local, regional or global.

Money Asset ETFs

These replicate the evolution of monetary indices and are one of the most conservative.

inverse ETFs

These allow you to trade a specific index, but you will win when the markets fall, that is, in the opposite direction.

Leveraged ETFs

These types of ETFs carry a lot of risk, and you need a lot of experience to be successful with them.

However, it offers great profitability even doubling or tripling your profits, according to the leverage for which you bet.

Smart Beta ETFs

These also replicate indices, but not always in the same way as the index, rather they can vary.

Why invest in EFT?

Exchange-traded funds have gained relevance in today's market, especially because they are extremely attractive to investors, thanks to the benefits they offer.

Since there are more investors willing to invest in investment funds, they also open up the possibility that there are managers that allow this type of operation to be carried out, increasing the options for brokers, for those interested in buying and selling listed investment funds.

Another reason why it is convenient to invest in ETFs is that this market has been growing in recent years, and is as diversified as the indices they replicate.

This also offers great earning potential and brokers have seen great earning potential in ETFs.

Best of all, investors who like passive management find a perfect opportunity in these assets, but active management has also been incorporated thanks to technological developments.

If you want to invest in ETFs I must tell you that you need a high technical level and a great experience investing, since the risk is much higher.

Steps to invest in EFT

If you have already chosen to invest in ETFs, you must follow these steps:

• Do a thorough analysis to get into ETFs, and finally decide if it is really the market for you.
• Analyze the types of management and choose whether you will opt for active or passive management.
• Passive management has the objective of analyzing the behavior of the markets in the long term, so that your profits will be seen in the future.
• An active management will allow you to carry out transactions in the same day, this will have a greater possibility of return, but it also implies a greater risk.
• Finally, create a Wallet and always keep in mind the information you need to operate, such as: the economic zone of the indices, the sector and, of course, the replicated index itself.

How to choose an EFT to invest?

Now, what follows is to choose correctly What will be the ETF in which you are going to invest?.

You should know that although they replicate the market indices, their behavior can be extremely different, since it uses the index itself and its fluctuation, but also how it influences other market indices.

To correctly choose the ETF in which you are going to invest, You should avoid thinking about those that are in fashion, since this can cause their cost to increase, but as in any other investment, when the euphoria passes, its price stabilizes again and causes a decrease in your profits.

You must know 100% how a specific ETF works, in order to have the necessary information and carry out the appropriate operation.

If you want to be a trader in this market, it is important that you become familiar with other markets, since although it may be very similar to the currency markets, in reality you need more experience, and know how to handle more information.

To choose the correct ETF you must observe the index that it replicates, the commissions that the platform will charge you and choose the ETF manager.

Advantages of EFTs

Although entering this market can be risky mainly for beginner investors, it also has advantages, which will allow you to become a professional trader.

One of the main advantages of investing in ETFs is that by replicating an index and not dealing with a real asset, management fees are cheaper.

The fact that it replicates in an index means that all operations, both buying and selling, will be much cheaper, and because it replicates other indices, you can diversify your investments, since it is a rising market.

By betting on ETFs you can invest in a large number of markets and generate great profits, all in a single platform or Wallet.

Another of its advantages is that you will have access to fast liquidity and you will be able to trade as long as the market is open. You will always have the information in real time and you will be able to obtain high dividends, according to the type of management you choose.

Frequent questions: