What are ETFs, pros and cons? Is this a good idea, and what happens if the market goes down, will i just loose the original amount or will i loose more. Which is the best way to invest with little money.
2006-08-23 08:32:46 · 4 answers · asked by upfromnutin 2 in Business & Finance ➔ Investing
Asuming your broker is Scottrade ($7.00) you have to pay $7.00 to buy the ETF and another $7.00 to sell it.
If you invest $100.00 you have to wait until your ETF goes up $14.00 just to recover your money.
In other words, your ETF has to go up 14% in a year and you make $0.00 after a year.
On the other hand, if you keep your $100.00 for a year in a bank account you make $5.00
You have to invest at least $350.00 and it will be a lot better if you invest $700.00
If you don't even make $5.00 after a year you are better off with a bank account.
Keep in mind with ETFs you can lose money.
I suggest you to save at least $1400.00 at the very least and invest in 2 ETF because YOU SHOULD NEVER INVEST ALL YOUR MONEY IN JUST ONE ETF.
If the market goes down you lose money.
If you have a cash account you only lose your own money but if you have a margin account and you bought your ETF on margin (On credit) then you will lose more than your $100.00
NOTE:
You need at least $2,000.00 if you want to open a margin account.
So for a while you will be losing only your cash.
If you need help you can drop me a line.
Top 5 Answerer in this category.
2006-08-23 12:36:48 · answer #1 · answered by Anonymous · 0⤊ 0⤋
You shouldn't buy just $100 of an ETF. If you paid $4 to buy it, you are already down 4%. If you wait till you have $1,000, you would be down .4%, but since it could move up or down .4% in a day or week, it wouldn't be as bad of a factor. An ETF is a bundle of like shares (such as XLE is energy stocks) that is not traded internally like a mutual fund (which eliminates taxes you don't see on your mutual fund when others in the mutual fund sell their shares) and has all the rules of a stock (you can even short them, which you can't do with mutual funds). It's not the market you have to worry about. I've had all my ETFs go up whjen the market was down and down when the market is up. ETFs don't go bankrupt or drop to zero so they always have some value and if you don't want to l;oose a gob of money, you can always put a stop (a sell order if it drops below the price you set) on it.
2006-08-23 10:11:05 · answer #2 · answered by gregory_dittman 7 · 0⤊ 0⤋
You can invest in ETF's with only $100. I would recommend opening an account with Sharebuilder. Commissions are $4 dollars to buy or sell at Sharebuilder and there is no account minimum and no minimum number of shares that you can purchase.
In my opinion, ETF's are a good way to begin investing. I would recommend a broad based index fund such as an S&P 500 ETF (SPY) or a total market ETF such as Vanguard Total Stock Market (VTI).
2006-08-23 08:48:55 · answer #3 · answered by howardrourke 3 · 1⤊ 0⤋
4% is alot but if it's all you have to invest and you plan on buying and holding do not be discouraged from investing because of it. However if you do have a larger sum to invest them by all means put it in the Vangaurd fund.
2006-08-23 11:27:34 · answer #4 · answered by Anonymous · 0⤊ 0⤋