What are ETFs?
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I have heard that ETFs are a beneficial option to diversify the investments. So what are ETFs, and how are they different from any other investment scheme like the stock market and fixed deposit? Are they actually a good option for long-term investment?
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In simple language, ETFs(Exchange Traded Funds) are collections of bonds, stocks, and other assets. Stock exchanges trade ETFs, which are investment funds. When you buy an ETF, you are buying shares of the entire collection.
It's very affordable; you can easily buy and sell the ETFs at market price. It gives you broad market exposure.
So it's always beneficial to invest in ETFs, as you can easily diversify your portfolio, which ultimately reduces the risk factor for long-term investment.Ultimately, its your choice where to invest. But I suggest:
- Invest in stocks when you want high returns with the high-risk factor.
- FDs are the safe options with assured returns, with a low risk factor.
- ETFs offer you a diversified portfolio with not too much risk and good returns.