ETF are exchange traded funds sold on the market. They may be portfolios of stocks in a certain sector such as energy, technology, retail, etc.
They give you exposure to a sector while still not focusing on one company’s stock. They are essentially sector portfolios mainly.
An example is the SPDR S&P 500 fund: ticker SPY
US Aggregate Bond Fund: AGG
You can look up these tickers on your phone and track them just like say GOOGL stock
- You can also buy bonds directly instead of buying funds
- Examples include US savings bonds, Municipal bonds, treasury bonds
- I don’t recommend this and have never done. I am looking for more oomph and less interest rate risk.
- If you want to buy bonds I recommend a bond mutual fund instead of buying bonds directly.
- The biggest issue I have with bonds is low return relative to risk
Very little return for very little risk. When interest rates were 5% or more these were worth it. Now with rates at 1% why bother. You lock up your funds for a year and get basically nothing back.
Well you get something right? Yes, but you might miss out on good opportunities that come by (opportunity cost). It’s like being stuck in an elevator when the Brinks truck overturns on the street and spills all its loot into the wind for everyone to grab and dash. You are locked in and not getting any other than maybe the quarter someone dropped on the floor!
What kind of opportunity would that be?
A market correction causes stocks to drop 10% in week. Now things are cheap and it’s good time to make a quick buck. But not if you are locked in.