How to Earn Big Money with ETFs: Investors’ Guide to ETFs for 2012

How to Earn Big Money with ETFs: Investors’ Guide to ETFs for 2012

ETFs stand for Exchange Traded Funds; essentially, they are nothing but a bundle of stocks that are in a way similar to what’s better known as mutual funds. Just like stocks, these ETFs are traded in open market, and any individual investor can buy ETF shares. In last few years, the popularity and craze of ETFs amongst investors has shot up like nothing else, as investors chose to pump in billions in these stocks. The fact that these stocks attracted over $260 billion in 2008, when the world was facing an economic meltdown, is a testament big enough to prove its popularity. Few also look at them as a very easy, cheap and lucrative way of diversifying their portfolio.

Salient Benefits of ETFs

Taxes:

ETFs more often come with incentives with positive tax compared to their mutual funds counterparts. The capital gains on which an investor is obliged to pay tax on is much lower as the turnover rates of these ETFs are much lesser.

Cost:

Cost on ETFs are far less as compared to any other funds; the reason is ETFs come with a very simple and unsophisticated structure, so any kinds of additional expenses, such as those on marketing are not required, as normally seen in other managed funds.

Dividends:

Both ETFs and mutual funds pay dividends to the respective investors but in a different manner. The dividends of index fund are normally routed back or invested back in those funds. On the other hand, ETFs dividend funds are collected over a period of a quarter and reinvested back all at once.

How to Get Started?

To begin with you can open an account with an investment company or a stockbroker of your choice. You can also trade ETFs with the same broker through whom you have been trading securities, stocks or other mutual funds. Make sure you discuss your plans and past experience of the company or the stockbroker before finalizing on one.

Tracking the Markets

Keep a track of big media journals or websites to study the performance of foreign markets and ETF. Discuss the ETFs that you think have good potential with your broker. An expert agent will most certainly give few more options and explain the risks involved in each of them. Finally, one can place the bet depending upon long term and short term financial targets.

Top 3 ETFs that have Rocked 2012

Dow Jones U.S. Home Construction Index Fund (ITB)

ITB can be a very interesting pick for those investors who are seeking to venture into construction and building ETF arena. The fund has already gained a very impressive 41.9% in 2012 so far, which is excellent considering the 9% loss that it had to deal with, during 2011 fiscal.

IPath DJ-UBS Grains TR Sub-Index ETN (JJG)

This ETN is said to be holding three important futures of commodity, with almost half portfolio to soya, thirty percent to wheat and twenty four percent to corn. The fund boasts of $108.7 million of asset-base and does trading of 126,600 shares/ day.

Market Vectors Egypt Index ETF (EGPT)

EGPT is popular amongst investors as it tracks The Market Vectors Egypt Index that comprises of firms that are present in Egypt or make at least half of revenues in the country. The fund manages $43.3 million of AUM and trades 109,100 shares/ day. The year to date return of the company has been outstanding, delivering 30.1%, compared to 16.1% of loss it suffered in 2011.

Therefore, investing in these three awesome ETFs can almost guarantee fantastic returns to those investors who’ve got high risk appetite and good deal of money to invest into ETFs for next 12 months or so.

 

Author Bio: James Hargreeves is an expert stock trading advisor, and he has been closely watching the ETFs and future trading markets for over 5 years. He loves to contribute investment tips and short term loans tips on popular finance blogs on the Internet.