The stocks of exchange-traded funds are called ETF stocks. ETF stocks provide exposure to a whole array of companies instead of focusing the investment on a particular company. By owning one ETF stock, investors own an equity stake in a wide variety of companies the specific ETF invests in.
ETF stocks track a specific index, be it a stock index, a bond index, or a sector-specific index, and are traded on the exchanges. Thus, investors looking for exposures to specific sectors, industries, and asset classes must choose the ETF stocks accordingly.
Factors to Consider Before Investing in ETF Stocks
Investors must consider that ETF stocks have a lower risk profile than the individual stocks due to the diversification offered by them. At the same time, the returns on investments in ETF stocks are lower than returns on investments in individual stocks.
Investors must also consider the expense ratio, fees, liquidity, and tax advantages of ETF stocks before investing in them. Investors should also take an in-depth look at the portfolio differentiation offered by a specific ETF versus the index that it tracks.
To track the returns potential of ETF stocks, investors should study the performance of the ETFs in the past years and the strength and experience of the management team. These factors play a significant role in determining the efficiency of ETF stocks in managing risks and enhancing returns.
Which ETF Stocks Should I Buy?
A wide variety of ETF stocks trade on the stock exchanges. The selection of ETF stocks will depend on investors’ risk appetite, sector specification, and overall investment goals. We have compiled a list of the best ETF stocks to make the selection easier for you.
Investors must ensure that the 3-year and 5-year returns of ETF stocks they choose to buy must be more than 15%, and the 1-year returns must be positive. Additionally, the most suitable ETF stocks should have a daily volume of more than 3 million and an expense ratio of less than 2.5%.