Throughout the last twenty years, Exchange-Traded Funds (ETFs) have started attracting more attention from investors due to their features. At first, these were taken seriously only in the early 90s. But today, many brokerage companies offer access to them, and DotBig is one of the best platforms for new traders who are just going to find out about these investments.
In a nutshell, ETFs are financial products resembling places that include an extensive number of securities traded on stock exchanges. Except for traditional financial instruments, they might offer alternative products, which are commodity and forex instruments. Why do so many investors invest in ETFs? How to start trading through the DotBig forex broker? Let’s find out.
Common Classification of ETFs Currently Exposed
Exchange-Traded funds mostly depend on indexes. To cut a long story short, the classification and functions of these products are differentiated according to the underlying asset classes. For instance, it might track products from the Forex market, commodity sector, and many others. There are also specific types that were developed to meet very specific needs. Look at the following:
- Inverse ETFs depend on indexes. They increase when the tracked index decrease;
- Leverages ETFs were created to maximize returns. In such cases, invested money is borrowed, and the percentage is settled when the leverage is exposed;
- Actively managed ETFs don’t track, instead, they are to outperform indexes;
What makes such ventures so popular
These assets have the same functions as mutual funds. The only crucial difference is that they are traded on exchanges, but not from specific companies. Except for this, we must consider several more peculiarities that make ETFs demanded.
Foremost, modern financial markets give exposure to the huge diversity of ETF products. Traders can invest in ETFs that focus on certain asset classes, which makes these instruments attractive for participants of different interests. Additionally, Exchange-Traded Funds are available at different costs, making them affordable for different categories of clients. To make it more clear, take a look at the digits: in 2003, the whole selection of ETFs included more than 200 instruments. As of 2022, this amount exceeds 8,500 products.
The second reason is that investing in ETFs provides more tax efficiency. Those who invest in these products pay taxes only for profits and losses of the individual deals.
Thirdly, ETFs might be bought or sold whenever the market is open. This means they provide more liquidity than mutual funds.
Last but not least, many ETFs don’t have a minimum investment amount, so they might be traded at $1. Such options are available with brokers that allow buying fractional shares.
Trading ETFs with DotBig
To start trading these instruments with the DotBig forex broker, you have to open a live account and make a minimum deposit of $250. ETF trading on DotBig comes at very low trading costs because there are no trading fees. Expenses are included in spreads, which, usually, don’t exceed 1.5-2 pips.
Specialists of DotBig will help both beginners and experienced investors to find financial instruments that might bring promising returns in the long run. DotBig analysts help to make long-term ETF investments that pay good dividends and provide regular passive income.
- SPY – SPDR S&P 500 ETF. At the date of writing this review, this product was traded at $389.63. This asset is popular both with active traders and long-term holders. Long-term investors like the diversity of US stocks included in their portfolios.
- QQQ – PowerShares QQQ ETF. This asset tracks the NASDAQ-100 Index. It is the product with one of the most significant daily trading volumes. As of the date of writing, the single asset was traded at $288.68.
- GLD – SPDR Gold Shares ETF. This asset tracks gold price. This product is backed by the price of the physical product, which makes it more stable than other financial instruments.
Pros & Cons
- They are exposed to trading whenever the market is open;
- They provide high transparency and good liquidity;
- They provide a better tax efficiency;
- Traders can place various types of orders.
- Although you may invest low amounts, ETFs are not very profitable for low-cost investments. Some markets are more beneficial from this perspective;
- Technical issues may happen to ETFs tracking underlying assets;
- Settlement dates make your funds received from selling unavailable for 2 days.
We have no doubts that new Exchange-Traded Funds will be introduced to the market due to technological progress. This will broaden the market and will provide a better selection of assets to invest in. This also means the investors will need to do more research to explore new products.