Vanguard ETF Offers You Investment Diversification

2007-03-08 10:33:40

( Financial )



Perhaps you’re interested to purchase a fund that tracks the stock market index, but don't want the hassles of opening a new account with a fund manager like Vanguard Mutual. If you’re an informed investor, you'll enjoy trading exchange-traded funds (ETFs), like Vanguard ETF.

A Vanguard ETF is a basket of securities, just like your usual Vanguard mutual funds. However, you can trade the Vanguard ETF on the stock exchange like ordinary shares of stock. In trading the ETF, you can execute buy or sell transactions throughout the trading day.

You don't have to wait until the close of the trading day to determine the ETF's transaction price, which is the procedure with mutual funds. In short, when investing in Vanguard ETFs, you buy shares in mutual funds that behave like stocks.

You’ll find ETFs right for you if you want to invest money in specific sectors, or in the entire market, and do so while the market is open. If you want to diversify your portfolio, this can be a good vehicle for you.

You can buy a low-cost ETF that tracks the sector you’re interested in, and though you don’t buy particular stocks in the sector, you’ll have a significant amount of investment in that sector but at the same time be diversified.

The primary benefit of Vanguard funds ETFs to you is that they are index funds. Since Vanguard funds company managers diversify the Vanguard investments in hundreds of stocks, buying into them makes your investment as diversified as their portfolio.

It is wise for you to avoid jumping in and out of ETFs to save on brokerage commissions paid on every transaction. If you buy and hold ETFs such as the Vanguard ETF, you’ll have the same sense of security as you would with an open-end index fund.


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