If you are looking to invest in stocks but don’t have the time and research capabilities to choose the appropriate stocks for your portfolio, ETFs are a great saviour! ETFs help you participate in the stock market with much more ease than investing in individual stocks without compromising liquidity. They offer greater diversification at lower cost compared to direct stock investing.
An ETF or Exchange Traded Fund is a type of mutual fund listed on the stock exchange and can be traded in real-time like any other stock listed on the exchange. Since ETFs are a type of mutual fund, their portfolio comprises of a basket of securities that mirror the composition of a market indices. Thus, you get to invest in selected stocks that are part of a market index without having to spend your time and energy in researching to select few stocks. ETFs are cost-effective not just compared to stock investing but also other categories of Mutual funds due to their low expense ratio.
ETFs are also available in the bond market, allowing you to gain exposure to the debt asset class just like any Debt Mutual Fund. You can cost-effectively invest in a broad basket of company bonds or stocks depending on your investment needs and trade in them just like stocks or bonds.