Updated: Jul 31, 2020
Our expert ETF panelists Jean-François Mesnard Sense and Sean Cunningham gave us a great 201 session and gave us insights into the practical aspects of getting started with ETFs.
Exchange traded funds (ETFs) have a number of benefits, including relatively deep liquidity (to understand more on assessing ETF liquidity, here’s a useful link from Investopedia), cost effectiveness, access in terms of entry point (you don’t need a big chunk of money to get started) as well as access to different markets and asset classes that may otherwise not be available to retail investors. ETFs are relatively easy to trade and cost-efficient with a huge variety of offerings.
One of the challenges is there are just so many choices, making it harder for a gal to narrow down and do the research required! But we learned that there are some key metrics to look at including the ETF’s underlying index, fees and expenses, where it trades, base currency, tracking error and sector breakdown. We went through a sample factsheet to understand the key information you should review when comparing products. Speakers noted that you can also reach out to a broker or a knowledgeable friend to get more information.
Step one to getting you actively investing: you need to set up a brokerage account! There are a lot of options out there, so make sure you do your research and choose one that you’re comfortable with. When it comes to making the trade, the panelists shared a few pro tips!
- Pro tip #1: don’t trade at the beginning/end of day (first 15 minutes and last 15 minutes or so) because of the volatility that typically ensues.
- Pro tip #2: look at where people are willing to buy/sell the ETF, the smaller the spread the better the trade.
- Pro tip #3: Limit order vs market order. A number of people prefer to use limit trade orders. Check out the difference on our ETF explainer!
When and What to Invest?
For the typical investor, a long-term approach makes sense. It also makes sense to allocate your funds across geographies, currencies and sectors to reap the benefits of diversification. In terms of which ETFs are best: while we’re not in the business of recommending specific products, a number of sensible options were mentioned including exposure to the US S&P 500 (given the size of the index), Greater China region for growth and markets that would be otherwise difficult for retail investors to access, like gold.
So what are you waiting for girl? Get going! You got this!