Investing in ETFs

How to Invest in ETFs:

If you want to grow at the rate the economy is growing then SPY is for you. It mirrors the Standard and Poor’s 500 (SP 500).  If you want to be in the biggest and more stable businesses then you should invest in DIA which mirrors the Dow Jones average.  At least for the next 5 to 10 years, I expect the SPY to grow faster because of Apple, Microsoft, Amazon, Google, and a couple of high technology stocks representing about 30% of SPY.  This should make this ETF grow faster than DIA, assuming the economy continues to grow.  I would also invest in QQQ because this ETF will probably have a much higher growth rate than SPY because they have a higher percentage of the 4 companies listed above and more growth stocks.

But I would also include some Chinese ETFs because China’s GDP is growing at a much faster rate than the US’s GDP.  I would also include either some bond ETFs or preferred stocks if you are investing in a retirement account.  If you are over the age of 55 and for those that are retired and taking distributions out of an IRA or 401(K) plan, you should consider having a high percentage of preferred shares or bond ETFs, especially if you have a smaller portfolio, see suggested ratios of assets for aggressive, conservative and retirement portfolio under-investing plan.

For those people who haven’t reached retirement age, commodity ETFs like GLD and SLV may be appropriate to invest in at the right time.  The downside is that commodity funds don’t pay dividends as a general rule.  The real power of EFTs is the vast amount of them and the ability to invest in commodities and various classifications of stocks – financials, semiconductors, industrials, etc. and bonds.

Finally, you can invest in inverse ETFs, these funds are purchased when you expect the market to decline or at least the stocks in the ETF are going to decline.

 

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