What Is ETF?
An exchange-traded fund (ETF) is a bundle of investments that are packaged 📦 and traded as a single investment. Like the 3-in-1 shampoo-conditioner jabón your little brother uses to save time! Ok, he’s onto something. ¡Anota! 🚿
ETFs are created by major investment companies that have to submit detailed plans to the U.S. Securities and Exchange Commission (SEC) for approval before they can start selling shares to investors. So you can relax because these are much safer than the burrito from the gas station convenience store… 🌯 👀
Some ETFs are actively managed by real humans who choose the investments 🚫🤖. But the vast majority of these funds are automatically set to mirror the moves of a market index. ¿Qué dices?
For example: The most popular ETF is the SPDR S&P 500 Trust, which is listed as SPY pero let’s pretend we’re a dancing James Bond 🕺🏽! The SPY tracks the S&P 500 and follows it’s moves (like any good spy would!) So when you buy this fund, or any S&P 500 fund, your investment will more or less reflect the moves that the stocks on the overall S&P 500 make. 🎯 If the S&P 500 is up ↗️, you can expect your overall investment to boogie up and rise as well. 🤗 If the S&P 500 has a bad day ⤵️, your investment has gotten tired and taken off their dancing shoes for the day 😧.
Pero don’t worry! Buying an ETF bundle is safer than buying individual stocks. When you own stock in a company that takes a nosedive, your shares also take a dive ↘️. But if you owned an ETF that included that same stock, the overall value 💲 of your investment probably won’t drop much because it has other investments included in the package to balance it out. ⚖️
If you watch the performance of your ETFs over time, you’ll become more aware of how the market fluctuates and why. And soon you’ll be the jef@ who’s investing in other stocks and riding that wave 🌊.
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