1. 25 Investments: Introduction
  2. 25 Investments: American Depository Receipt (ADR)
  3. 25 Investments: Annuity
  4. 25 Investments: Art and Collectibles
  5. 25 Investments: Bonds
  6. 25 Investments: Cash
  7. 25 Investments: Closed-End Investment Fund
  8. 25 Investments: Common Stock
  9. 25 Investments: Convertible Bonds
  10. 25 Investments: Corporate Bond
  11. 25 Investments: Futures Contract
  12. 25 Investments: Life Insurance
  13. 25 Investments: The Money Market
  14. 25 Investments: Mortgage-Backed Securities
  15. 25 Investments: Municipal Bonds
  16. 25 Investments: Mutual Funds
  17. 25 Investments: Options (Stocks)
  18. 25 Investments: Exchange-Traded Funds
  19. 25 Investments: Preferred Stock
  20. 25 Investments: Private Equity
  21. 25 Investments: Real Estate & Property
  22. 25 Investments: Real Estate Investment Trusts (REITs)
  23. 25 Investments: U.S. Treasury Securities
  24. 25 Investments: Unit Investment Trusts (UITs)
  25. 25 Investments: Venture Capital
  26. 25 Investments: Zero-Coupon Securities
  27. 25 Investments: Conclusion

ETFs represent an evolution from mutual funds.  They have been around since approximately 1993 but have really grown popular in the past decade, or so.  An ETF is similar to a mutual fund index fund in that it seeks to match the return of an underlying index.  But it trades like a stock, or throughout the day for the same price as most stock commission rates.  They are created by placing millions of shares into a commingled trust.  In this respect, it is similar to a closed end mutual fund (covered in more detail below).  An ETF can also be sold long or short (covered in the options section) and have related options attached to them.   

 

Objectives and Risks

 

Investing objectives are limitless given the wide array of ETFs available.  Like mutual funds, they offer diversified exposure to an index, industry, sector, or asset class.  Some are even leveraged, or use debt to try and magnify (leverage) the returns.  Costs are low and the same as trading stocks.  There are some tax efficiencies in regard to the way that buys and sells from individual investors can flow through the underlying securities held in the EFT trust.

 

How To Buy or Sell It

 

Same as stock trades, which online can be as low as $4.95 per trade.

 

Strengths

 

Diversification

Liquidity

Low Cost

 

Weaknesses

 

More opaque structure than stocks or mutual funds

Leveraged ETFs increase downside risk

 

Key Considerations

 

Liquidity:  High

Historical Returns:  High (can match any asset or class)

Inflation Protection:  Depends


25 Investments: Preferred Stock
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