If you have been reading Investors Column for a while, you probably are beginning to make some sense of what stocks are, how to buy and sell them.  You also are beginning to understand what mutual funds are.

But there is another category of investment choices available:  “Exchange Traded Funds”, or “ETFs”.  ETFs are bought and sold just like stocks.  They can be bought or sold at any time throughout the day, (typically 9:30a.m. to 4:00p.m.) just like stocks.  In contrast, you place an order during trading hours, but mutual funds can only be bought or sold after trading hours, at the day’s closing price.

ETFs allow you to buy shares of a fund that focuses on a particular group of stocks.

What if you have a pretty good expectation that businesses will improve generally, but you do not have knowledge of particular businesses?  

If you would like to buy stock in a wide variety of businesses, but simply do not have the money to buy so many different stocks, the “SPY” ETF may be your best choice.  

The SPY ETF reflects the current value of the S&P 500 index; note the similarity of the two graphs.  It moves up and down in concert with the S&P 500 index.  So if you think the S&P 500 is on a generally upward trend (i.e., that the business growth as a whole will be improving), you could buy some shares of the SPY ETF.  

You can buy as many shares of SPY as you want; that will give you the equivalent of owning shares of stock in all 500 companies.  As the S&P 500 moves, so will your investment.

Like shares of stock, you can track how your ETF shares are doing on your PC, cellphone, iPad, etc.  

Should you want to do so, you can sell your shares in an ETF at any time, the same as shares of stock.

There are other ETFs as well.  Tech stocks as a whole have been doing well lately.  If you are interested in investing in Tech stocks but are not sure which particular Tech companies are the best choices, buying shares of the “XLK” ETF may be worth considering.

ETFs also exist for investors looking for fixed-income, sector ETFs focusing on a particular industry, foreign market ETFs, and much more.

A complete list of U.S. ETFs can be found on Wikipedia.  Search for “List of American exchange-traded funds”.  The list is broken down by categories of ETFs, and includes ETFs for bonds, commodities, and other types of investments.

As with any type of investment, a lack of knowledge can lead to expensive mistakes.  Doing the research necessary to assure successful investments is always a requirement.  

“Know before you go!”

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