If You Buy ETFs, Your Portfolio Will Thank You

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If you like to play the market, hedge your risk, or even invest in foreign sectors, then you should consider buying an ETF. Exchange traded funds are getting more popular by the day and the selection has never been higher — for good reason. So if you haven’t gone long with any of the types of ETFs available, then here’s some good reasons why you should.

1. Investing in the Market

Many investors (novice and advanced) like to play the market. Whether you want to get long the NASDAQ or the DOW, theres an ETF to help you do just that. Market ETFs like SPDRs. QQQQs. and diamond ETFs (oh my), are ways to invest in stock markets without having to buy individual stocks, indexes, or even high cost mutual funds.

2. Invest in Foreign Markets

Just like investing in a domestic market, you can buy ETFs to invest in foreign markets as well. However, with foreign ETFs you can take it a step further. There are emerging market ETFs. foreign currency ETFs. and ETFs for specific countries like China. Investing in foreign regions has never been easier with all of the different types of foreign ETFs .

3. Invest in Industries and Sectors

4. Invest in Commodities

5. Buy ETFs to Get Short

6. Hedge Risk with ETFs

If you like to trade options, especially index or ETF options. buying an ETF is a great way to hedge puts or even a short call position. And in some cases, you can hedge a short index or commodity position with a long ETF position. So ETFs can be a great tool to minimize risk in your trading strategy.

7. Create a Revenue Stream

Many investors love dividends. And dividend ETFs are a way to get more of a good thing. There are exchange traded funds specifically created to include dividend stocks that create a revenue stream in your portfolio. Just be aware that taxes on ETF dividends are treated a little differently.

And dividend ETFs are not the only way to create a revenue stream, bond ETFs do so as well. Just as with any bond, a bond ETF focuses on assets that generate interest payments within your portfolio, so ETFs can offer two ways to create a revenue stream.

8. Diversify Your Investing Strategy

Weve outlined many ETF investment strategies already, but there are many more as well. ETFs are great plays for earnings season. There are leveraged ETFs for investors who have higher risk tolerance, and traders can play volatility with ETF option straddles. The strategies are limitless.

9. Reap ETF Benefits

And more than diversifying your trading arsenal, ETFs have many advantages over other investments. The battle between ETFs and mutual funds has been very heated, but ETFs also have some edge over indexes and stocks as well. No investment is the end all be all, so ETFs have their disadvantages. too. But Im here to tell you, you should consider buying ETFs over other investments in certain situations.

10. Reap the Tax Benefits

While I am not going to outline all of the advantages of ETFs in this article (there are plenty of others that do that see above), the tax advantage has to be mentioned. The biggest ETF benefit is the way they treat capital gain taxes they are not realized until the entire ETF is sold. This is different from mutual funds and indexes where the capital gain tax is realized when trades are made during the life of the position.

11. Save on Commissions and Fees

So if you havent included ETFs in your portfolio, its high time you should. Getting started with ETFs has never been easier. However, as with any investment, conduct thorough research and make sure you know what is in an ETF before you buy it.