Should you get in on the silver boom? Here's what's driving the increase in silver prices and some silver ETFs to consider.
What Are ETFs?
The term ETF is short for Exchange-Traded Fund – a security that tracks an index, commodity or basket of stocks. An ETF is somewhat similar to an index fund except that shares of an ETF trade just like a stock on a stock exchange, so they can be bought and sold very easily. ETFs are valuable investment tools because, unlike mutual funds, they can be traded throughout the course of a day.
Most ETFs track indexes. For example, the SPDR S&P 500 (NYSE: SPY) tracks the Standard & Poor’s 500, while PowerShares QQQ (NYSE: QQQ) tracks the Nasdaq-100.
ETFs can be appealing to investors for several reasons:
ETFs allow investors to sell short, buy on margin, and purchase as little as one share at a time
With lower management fees, ETFs are less expensive than mutual funds
ETFs can efficiently help diversify an investor’s portfolio
ETFs allow people to invest in a specific industry
ETF gains aren’t taxed as heavily as those earned through mutual funds
Downsides to ETFs are that, like stocks, they typically have to be bought through a broker; some countries have limited ETF markets; and they aren’t all necessarily designed for long-term investors. While not for everybody, ETFs are a good way for investors to diversify their portfolios at a low cost.
To browse through a comprehensive list of ETFs, visit Yahoo! Finance’s Exchange-Traded Fund Center.
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