👋 Hi finance enthusiasts and fellow investors!
Two weeks ago we talked about the important step of starting to invest. I introduced two simple ways: Cryptocurrencies and ETFs.
Cryptos are a common topic here, but as part of an investment newsletter, it's time to talk about ETFs. After all, it's not just crypto that belongs in a well-positioned portfolio.
Today we're talking about what ETFs are, how they work and why they're perfect for long-term wealth accumulation.
Let's get started!
What are ETFs?
ETFs, or exchange-traded funds, are like a collection of stocks or bonds in a package. You invest in these funds and they mirror the performance of a specific index, such as the DAX in Germany or the S&P 500 in the US.
How do they work?
ETFs trade all day on the stock market, much like shares. You can buy and sell them when the stock market is open. This makes them flexible and accessible.
What makes an ETF different from a general fund?
A key difference between ETFs (Exchange-Traded Funds) and conventional funds is the way they are managed. ETFs are usually passively managed funds that track the performance of a specific index, whereas conventional funds can be either actively or passively managed. This affects the costs, diversification and risks of the investment.
Why are they perfect for long-term wealth accumulation?
ETFs offer diversification. You invest in many companies at the same time, which reduces your risk. They are also cost-effective as they have low fees. This makes them ideal for long-term investments.
Which ETF should you buy to start with?
I can't give a personal investment recommendation, but I would start with an MSCI World ETF. Make sure the fees are low. You can search for ETFs and compare them on JustETF.
What are "MSCI World" ETFs?
The MSCI World Index includes stocks from developed countries around the world. When you invest in an MSCI World ETF, you are essentially buying a fund that tracks the performance of these global stock markets. This is a way to broadly diversify your portfolio and benefit from global economic activity.
How can you get started?
To buy ETFs, you need an account with a broker. As regulation in the traditional financial sector is strict, good brokers are mostly region-specific. In German-speaking countries, for example, I recommend Flatex, but there are many other options. A simple Google search for country-specific comparisons will help you find the right broker.
Then you should:
Decide on an index or sector that interests you - probably MSCI World
Choose the right ETF with low fees.
Think about how much you want to invest.
Buy the ETF through your broker.
Optional: Start a monthly savings plan that invests automatically.
That's it for this week. I hope this information has helped and encouraged you to start investing. ETFs are a great way to build long-term wealth without complicated strategies.
Stay tuned and invest in your financial future and let me know if you have any questions!
Best regards,
Stefan
Co-Founder of CryptoExplorer & InvestmentExplorer (coming soon)
100%!
Additional on choosing ETFs, I like those 2 websites for data + comparison:
- https://www.trackinsight.com/en
- https://simplywall.st/