Exchange Traded Funds (ETF) So you may be asking if the market is so difficult and even stacked against the trader, how can a trader succeed and make money, how do they beat the unbeatable game? There is a much simpler method that takes little time to study and decide on. For a new investors I would encourage them to consider exchange traded funds (etf) which is a fund that can be bought for a commision similar to a stock, which is much smaller than a mutual fund. There are etfs that mirror the market, specifically the Dow Jones Industrial Average (the top 30 chosen American companies). Standards and Poor 500 (500 professionally chosen well performing stocks) and the Nasdaq (a group of 60 well performing stocks whose emphasis is technology).
There are many underlying benefits from etfs that mirror the market. First you can, with some measure of confidence, buy and believe that your investment averaged over time will go up at a rate of roughly 8-9% annually. All this without a great deal of study and research on the investor's part. The invested money will grow faster than the 3% annual inflation that people who don't invest have to deal with.
Etf Example: As an example suppose you have saved a modest $20,000. If you invest it in an etf that represents the Dow Jones, like the eft called dia, with the power of compounding interest your investment should double to over $40,000 within nine to ten years. For busy individuals who work during the week, this alone can be a lifesaver and a dream come true.
Leverage: And for the those willing to accept more risk there are etfs that seek to give results that are twice or three times the results of market indices themselves. They accomplish this through leverage, which is a trading strategy that finances it's positions in the market using capital with debt to make its investment much larger thereby giving a higher rate of return that would normally not be possible without debt. The leveraged funds I like to invest in are called the Spider funds. These etfs can be great for long term investors that have a stomach for the inevitable dips and can wait for their money to rise. The app has a leveraged funds included (ddm) that is meant to provide practice and to show how much more an investor can make in certain situations.
Etf Results with Leverage: Let's briefly revisit the last example. Suppose you invest $20,000 and wait for the market to double. You buy an etf that seeks to perform at twice the rate of the Dow, like the fund called ddm. By the time the market doubles instead of having an investment worth $40,000, your investment would be worth $60,000.
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