ETFs are becoming an increasingly popular method of investing money. However, many investors view ETFs primarily as tools to gain broad exposure to equity markets.
What many people do not yet realise is that you can do much more through ETF investing than just investing in stocks. You can also invest in gold, real estate and bonds.
ETFs can also be instrumental in building a diversified investment portfolio. For example, a multi-asset ETF invests in multiple asset classes simultaneously, thereby allowing you to achieve a high level of diversification through a single ETF purchase.
ETFs are largely passive investment vehicles that track indices. For this reason, ETFs are also known as index funds. Because there is no need for (expensive) active fund managers to analyse, purchase and sell individual securities, ETF investing can be more cost-effective than investing in active investment funds.
ETFs can pay dividends or reinvest profits. VanEck offers both ETF categories. For example, a high-dividend ETF that pays out a dividend in addition to many thematic ETFs that reinvest profits.
Thematic ETFs allow you to gain exposure to companies thought to benefit from certain long-term trends. VanEck offers a variety of thematic ETFs, such as a semiconductor ETF, an esports ETF, a hydrogen ETF, a smart home ETF and a China ETF. We also offer various metal ETFs, including a mining ETF, gold miners ETFs and a rare earth ETF.
Finally, some of our newest ETF offerings are focused on sustainability. It is important to realise that ETFs carry risks. The main risk is market risk: if markets go down, ETFs will be similarly affected. Thematic ETFs, in particular, often have sector concentration risks due to the risks inherent in investing in smaller companies.
One way to reduce risk is to add bond ETFs to a portfolio through government bonds ETFs and/or corporate bonds ETFs. Government bonds exist in multiple variants, such as “safer” high-quality European sovereign and “riskier” emerging markets local currency bonds.
Fallen angels are an example of risky corporate bonds. These are bonds that were investment grade at the time of issue, but have since been downgraded to non-investment grade (speculative). These bonds are accessible through our fallen angel ETF. Higher risk is usually offset by a higher coupon return and possibly a higher total return. However, this is not guaranteed.
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