Chapter 5

Stock Investing through Exchange-Traded Funds

In This Chapter

arrow Seeing similarities and differences in ETFs and mutual funds

arrow Picking a bullish or bearish ETF

arrow Getting the basics of indexes

When it comes to stock investing, there’s more than one way to do it. Buying stocks directly is good; sometimes, buying stocks indirectly is equally good (or even better) — especially if you’re risk-averse. Buying a great stock is every stock investor’s dream, but sometimes you face investing environments that make finding a winning stock a hazardous pursuit. For 2013–14, prudent stock investors should consider adding exchange-traded funds (ETFs) to their wealth-building arsenal.

An exchange-traded fund (ETF) is basically a mutual fund that invests in a fixed basket of securities but with a few twists. In this chapter, I show you how ETFs are similar to (and different from) mutual funds, I provide some pointers on picking ETFs, and I note the fundamentals of stock indexes (which are connected to ETFs).

Comparing Exchange-Traded Funds and Mutual Funds

For many folks and for many years, the only choice besides investing directly in stocks was to invest indirectly through mutual funds. After ...

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