This is a message to all the lazy people out there:
did you know that you have what it takes to be a great investor? No? Well, you do!
Being lazy is actually the best thing you can do on the stock market.
“I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up.”
James Rogers (American investor)
Passive investing with ETF’s
As I said, being lazy on the stock market is a great quality. But in finance we don’t call it being lazy, we call it passive investing.
Passive investing is a strategy where you interfere as little as possible and you just let your portfolio grow. It’s also called the buy-and-hold strategy: you buy investments with the goal of keeping them long term, instead of aiming for the short term profits.
While there are many ways to shape your own passive investment strategy, there is one product that is absolutely perfect for this approach, and that product is an ETF.
Learn everything there is to know about passive investing with the ETF crash course.
Subscribe to the waiting list and get a 20% discount!
First of all: what is an ETF?
An ETF – or exchange traded fund – is a type of passively managed investment fund that is traded on an exchange, just like a stock.
It is a basket of securities that allows investors to diversify their portfolio.
But what is a stock again? A stock is a fraction of a company. It provides the owner with a certain amount of rights, and the company gets money in return.
How it works
What an ETF does is gather financial products – most commonly stocks – and put them all into one basket. Investors can then buy units of the fund (yes, an ETF is a fund) through which they own fractions of all the underlying assets.
What types of ETF’s are there?
Index funds
An index measures the performance of a range of listed companies in a specific economy or industry. For example: the S&P 500 is a collection of the 500 largest listed American companies.
An index fund will track that index and replicate its returns. Because of this, index ETF’s are also called trackers.
Industry ETF’s
An industry ETF focuses on a range of stocks within a certain industry. For example: an ETF that focuses on the pharmaceutical industry will invest in a collection of stocks issued by pharmaceutical companies. This way investors don’t have to buy all of those stocks individually.
Bonds ETF’s
A bond represents a loan between a borrower and an investor. Some ETF’s collect various bonds into one basket and offer them to investors as a package deal. Bond ETF’s are a way to reduce the risk in your portfolio as bonds are relatively secure investments.
I discuss more types in my ETF crash course. Join the waiting list now.
Why would you invest in an ETF?
Diversification
A diversified portfolio reduces the risk and optimizes returns. You can diversify by hand picking individual stocks, or you could just buy one or more ETF’s that are spread out across industries, products…
ETF’s allow you to diversify with very little effort.
Low fees
Contrary to mutual funds, most ETF’s are passively managed. This results in lower fees, because there are no fund managers whose expertise needs to be paid for. The lower the fees, the higher your possible returns.
Passive investing
Aka: being lazy! The only thing you need to do is set up automatic regular payments, and the ETF will do the hard work for you. There is no short term trading required. Just let the fund work its magic and let your money work for you instead of the other way around.