The retail ETF is one of the most popular ETFs on the market today. It is tied to the retail sector as a whole. As the retail sector goes, so goes the retail ETF. It is a very diversified investment that allows people to put their money into the retail sector without investing into a specific retail company. While many investors are vaguely familiar with the retail ETF, they may not fully understand it or how it works. Here are the basics of the retail ETF and how it can benefit you.

How it Works

The retail ETF is an investment that is made up of many other types of investments. It is much like a mutual fund except it has superior flexibility. With a mutual fund, you can only trade them at the end of the trading day for the net asset value. With an ETF, you can actually trade them throughout the day on the stock market. They are actively traded and you can trade them with any stock broker. These ETFs are actually made up of a portfolio of retail stocks. This limits your risk in a particular company and puts the risk back onto the retail sector as a whole.

With this type of investment, you are basically putting your money at the risk of the retail market. When people are going out and spending money, the retail market does well. Stocks rise and investors are happy. When people hang on to their money and do not spend it, retailers tend to suffer. Those that invest in this type of ETF do not do as well during those periods. Therefore, you should try and buy when the retail market is a bit down, right before an uptrend. 

Types of Retail ETFs

With hundreds of ETFs in the marketplace today, you can rest assured that there are several retail ETFs for you to choose from. Obviously a retail ETF can not invest in every retailer in the marketplace. Therefore, they tend to pick certain portions out of the retail market to invest in. For example, there is an ETF that just invests in the big box stores. They only hold stocks from Wal-Mart, Target, Kohl's, Lowe's, and Home Depot. There are other retail ETFs that focus on more specialty retailers. Then there are retail ETFs that try to get a portion of all of the aspects of retail and give you a very diversified investment. Regardless of what aspect of retail you want to invest in, there is an ETF that can provide it for you. 

Benefits of Retail ETFs

Investing in a retail ETF can be very productive for you as an investor. You can diversify your risk over a class of assets instead of just one. You can also quickly buy or sell them on the stock market if something comes up. The flexibility that the retail ETF offers you can make it very attractive. 

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