BeMarketSmart

admin answers:

ETF stands for exchange traded funds. There are two types. The classical closed end funds which have been around since the 1920s and which a couple dating back to that period are still traded. GAM is one. ADX is another. They are very much like open end mutual funds with two important exceptions. One is that they do not trade at net asset value but at what the market will bear. The second is that there is a fixed number of shares outstanding.

The more recent versions are the ETF index funds. They date back only about 15 years. Vanguard made a hit with their S&P 500 index fund Which has been in existence for over 30 years. Its main attraction is very low expenses compared to managed mutual funds. Someone got the idea to take what Vanguard did and make an equivalent ETF. The advantage of the ETF version over the Vanguard version is that it can be bought and sold at any time the market is open and options can be traded against it also. It can also be shorted just like any stock. It became very popular for those reasons. The stocks for the ETFs are chosen to mimic the stocks of the indexes themselves. For example S&P publishes the stocks and their weightings that make up each of their indexes. All the ETFs have to do is buy the same weighting of each stock. They do not exactly match the indexes at all times but they are very nearly so. In fact indexes are being invented so that ETFs can be created to match them. Bazaar, no? There are quite literally hundreds of them today–about 800 actually. It is very difficult to buy an index in itself. The index is made up of a large number of shares and to buy the index one would have to buy each stock in the index in the correct proportion. That is exactly what the index funds do. They do that for you. Then all you have to do is buy one share to mimic the index. That is a lot cheaper than attempting to buy the index itself.

Some indeed are very popular. Some others have not proved to be so popular and they have been liquidated. Certain ones provide a means for an investor to buy certain holdings that would be otherwise difficult to buy at such a reasonable price or in such a convenient form. Among these are GLD, SLV, OIL, etc. There are many others besides. Some are just hair brained ideas that someone thought they might make a buck off of.

admin answers:

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admin answers:

You should invest in a diversified mix of stocks, bonds, and money market funds. You want to buy a diversified portfolio of stocks as individual stocks are too risky. Most folks have a dificult time buying a properly balanced portfoilio of stocks on their own. They will misbalance their portfolio by buying all small stocks or all growth stocks, or some other misbalanced assortment of stocks. Unless you know what you are doing, it is best to buy mutual funds. I like Vanguard.com, other people like Fidelity, TIAA-CREF, and DFA. Buy no-load, low cost funds. If you are like most people you will invest part of your money aggressively in stock funds, and part conservatively in money market funds and bond funds. Vanguard.com has an on-line questionnaire which will give you an idea of how to do “Asset Allocation,” determining how much to put in each type of fund.

If your company offers a 401K plan at work, try to invest the most you can. The money grows tax free, and some companies will match your contribution. Investing in a mutual fund IRA is also a good idea.

I like index funds. Because of their broad diversification, you are less likely to have a dramatic drop in value. They also have the lowest expenses. For stock funds, I would suggest putting ~70-80% of your money in the Vanguard Total Stock Market Index Fund. And ~20-30% in a foreign stock index fund. However, there are many different opinions out there on what the best mutual funds are. Read the links below and form your own opinion.

If you have high-interest debt, like credit cards, it is best to pay this off first before trying most of the investment ideas above. You should also have 3-6 months of salary saved up as an emergency fund in a bank or money market fund before trying more risky investments.

Believing advice you get on Yahoo answers can be risky, so read these websites for further information. If you find it too confusing, contact a professional financial advisor. They will charge you significant commissions, however.

Sources:

http://www.vanguard.com/VGApp/hnw/planningeducation

http://www.fool.com/school.htm

http://sec.gov/investor/pubs/assetallocation.htm

http://www.diehards.org/readsites.htm

http://finance.yahoo.com/education/begin_investing

http://finance.yahoo.com/funds/basics

Asset Allocation Calculators
(Determining how much to put in stocks and how much into bonds and money markets is a personal decision depending on your financial status. These Asset Allocation questionaires give you a rough idea how to do this. I like Vanguard best, but try some of the other sites as well.)

https://flagship.vanguard.com/VGApp/hnw/FundsInvQuestionnaire?cbdInitTransUrl=https%3A//flagship.vanguard.com/VGApp/hnw/planningeducation/education

https://ais2.tiaa-cref.org/cgi-bin/WebObjects.exe/DTAssetAlcEval

http://www.ifa.com/SurveyNET/index.aspx

Web forum: http://www.diehards.org/
(Many investment web forums are overrun by scam artists. This one seems the most legitimate site.)