Exchange-traded funds (ETFs) are a collective investment product but their shares are traded just like stocks, in the secondary market. However, its main advantage over stocks is that they offer diversification. The invested savings will be distributed and the possible losses of some assets could be offset by the revaluations of others.
According to BME, operator of the Spanish stock market, “they combine the advantages of diversification of funds with the flexibility of trading shares.” But investing in ETFs also carries risks. Regarding this financial product, the National Securities Market Commission (CNMV) explains that “they are usually variable income funds, except those that replicate fixed income indices, for which reason they generally present a high volatility and are suitable for probable investors to the risk”.
In any case, to invest in ETFs, as with any investment, it is important to be aware of the risks involved and to know exactly what investment is being made. To learn everything about how this financial product works, a good starting point is to turn to a book. Next, we collect some that can help any investor.
Investing in ETFs for beginners
For investors who are starting completely over again, there is nothing better than a practical guide that introduces the reader to the world of investing and, specifically, to the exchange-traded funds market. This is the case of the book Investing in ETFs For Dummies (Investing in ETFs for beginners), which also helped more experienced investors to incorporate ETFs into their investment strategy.
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It is written by Russell Wild, who describes ETFs as “wonderful tools for filling in the gaps in your investment portfolio, with the power to give you access to markets or areas of investment that might otherwise be restricted, too expensive, or extremely risky.”
The ETF book
The ETF book includes “everything you need to know about exchange-traded funds.” Richard Ferri, an author with several published books on investment and finance, collects in this book the necessary tools to invest in exchange-traded funds successfully. “Each chapter offers concise coverage of various topics and is packed with detailed information on different types of ETFs, as well as practical advice on selecting and managing them,” according to the book’s description.
The Little Book on Common Sense Investing
The investment policy of the ETFs is based on replicating an index, so that an entire market is covered, but it reduces the costs of investing in each of the shares that comprise it. This form of investment is explained in The Little Book for Investing with Common Sense, written by John C. Bogle, which also represents “a pocket guide to investing following the philosophy of Warren Buffett”, one of the best-known investors and followed.
“Common sense tells us (and history confirms it) that the simplest and most efficient investment strategy is to buy cheap and hold shares of publicly traded companies,” see book description.
ETF investment
Another book that can help ETF investors is ETF Investing, written by Nathan Bell. This is a beginner’s guide to creating passive income and achieving financial freedom with this investment product. The purpose of this book is to allow new investors to become familiar with how the ETF market works and to “start making a profit by investing in this wonderful financial product,” as stated in the book’s description.
