Buying stocks in a Bear Market where the top US indices are down by more than 20 percent from the highs is not everybody’s cup of tea. The downturn may continue and the market may take time to consolidate before resuming the upward journey. Still, how the market will behave from here is not an easy thing to predict. For long-term investors, buying decisions need not be based on predictions. If buying individual stocks at the current market levels is a concern, consider looking at exchange-traded funds (ETFs).
While individual stocks may be more volatile, taking an exposure through ETF may help you manage volatility in a better way.
ETF is a sort of variant of a mutual fund and tracks a specific index. The units in an ETF can be bought or sold only on a stock exchange anytime during trading hours. ETFs are low-cost investments and allow one to take exposure in several stocks of the same index at one time. They come in various forms and typically track different indexes and sectors. Similar to stocks, they even have their specific Ticker symbol.
There are several ETFs available on the US stock exchanges tracking the banking sector or the tech stocks.
Vanguard Financials (VFH) is an ETF that will suit you if you prefer exposure to banking stocks. Similarly, Invesco QQQ ETF tracks the Nasdaq-100, a market index comprising 100 of the largest non-financial companies on the Nasdaq Stock Market. Along with FAANG stocks, exposure in the blue-chip Tesla and several other tech stocks can be taken through this ETF.
The SPDR S&P 500 ETF is a hugely popular ETF that tracks the S&P 500 index – an index of a diversified group of large-cap US companies across eleven major industries. If you are unsure which stocks of the index could be a long-term winner, it’s better to take exposure to the entire index through the ETF.
ETFs, give you an opportunity to invest in all of the index stocks or several stocks of the same sector in a single go and through a single investment. After all, you need to be invested in all of the growth stocks that hold the potential to generate a high return over the next few years.
Investing in an ETF gives easy access to take exposure to different stocks of the same index or sector. In an ETF you get the live prices as trading happens all through the market hours and the cost of owning them is considerably low.