ETF trading has become one of the most popular investment strategies in the world today. The ETF has not been around for as long as some of the other investment vehicles, but it is growing rapidly in popularity. You can now choose from over 800 ETFs that are actively traded in the market and there are billions of dollars that are tied up in ETF portfolios as well. If you are considering trading ETFs as part of your individual portfolio, you will need to know some basic information to understand the process better. Here are a few things that you need to know about ETF trading. 

What is an ETF?

In order to profit from an ETF investment, you need to have a basic understanding of what they are. The term ETF stands for Exchange Traded Fund. This means that it is a fund, much like a mutual fund that is traded on the stock exchange. This makes it very different from a mutual fund as you can only trade those at the end of the trading day for whatever the net asset value is. With an ETF, as long as the exchange is open, you can trade them. You can buy or sell them, take out options on them, or do nearly anything that you could do with a stock. 

What You Can Trade

ETFs are made up of a diverse portfolio of stocks and other assets. ETF funds may hold stocks in an array of companies. You can invest in commodities like oil, gold, wheat and the like without taking out a confusing futures contract. ETFs are very unique because they allow investors to take advantage of an entire industry. For example, say that you had an interest in retail. You did not want to buy one retail store's stock, but you still wanted to get involved somehow. You could go out and buy shares of a retail ETF that holds stock in Wal-Mart, Target, Kohl's, and many more. This would allow you to take advantage of the retail market, without putting all of your eggs in one basket. 

There are even plenty of ETFs made up of sub-sectors in the market. For example, you can invest in the healthcare industry and more specifically cardiac devices or drugs. This gives you the ability to take advantage of certain parts of an industry, instead of investing in the industry as a whole.

How to Trade

In order to trade an ETF, you will need a trading account with a standard stock broker. You should be able to find several different options to open an account with. You can then download their trading platform to your computer and trade from the comfort of home. As long as the market is open, you are free to trade ETFs. You may want to limit the amount of transactions that you take because you will have to pay a commission to the broker for buying and selling ETFs. 

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