When it comes to investing in financial markets, it’s a wise decision, sometimes to say ‘no’.
It’s perfectly ok, when you think the selection process as proposed in last chapter is too hard and too time consuming, and just following tips from the internet is too dangerous.
So just don’t do it, besides there is an alternative, how you can still profit from the markets in an easy and pretty save way.
This way is called index investing. Whereas researching and trading single shares is called ‘active investing‘, the process of index investing is labeled ‘passive investing‘.
And it’s as simple as selecting a movie from a film supplier’s database, where you can choose between ‘romance’, ‘adventure’, ‘horror’, ‘comedy’ or whatever you like to see.
In financial markets, the supplier to choose from is called ETF or Exchange Traded Fund. With an ETF you participate fully from any stock market performance for a relative small fee. All you have to choose the market or sector you want.
- US technology shares?
- European banks?
- The DAX or Dow Jones?
- Chinese, australian or brazilian stocks?
No problem, there is basically an ETF available for each stock market index, for each country or each sector you can imagine.
So it’s no surprise, ETF’s are a success-story in the early 21st century. Investors worldwide are currently holding ETF’s in value of about 2 trillion dollars – that’s twenty times more than in 2002, when the industry was celebrating to pass the 100 billion dollar mark in ETF-assets.
The sexy little sister of ETF is called index certificate. A certificate basically fulfills the same purpose as an ETF for even lower costs. Besides certificates are not traded on stock exchanges but over the counter and are a touch more riskier than ETFs.
For further information about ETF’s with a specific romanian angle, I would advise to study the brochure provided by the Bucharest Stock Exchange.
Next chapter is: http://www.theleader.ro/stock-market-indices/