ETFs explained

hi it's Patty H at Marketplace today I want to talk about exchange traded funds and to help me here's we Ethan Ethan turned 16 recently and when he did he got $1,000 from his aunt mud now initially Ethan wanted to go out and buy a bunch of gold but he find that that $1,000 doesn't even buy him an nights it buys him like this much okay so then he says maybe I'll invest in some stocks I'll buy the S&P 500 unfortunately $1,000 isn't even going to buy him one or two of those S&P 500 stocks so he goes to his Andy M he says Andy I'm really vexed how am I supposed to invest properly she says I've got three words for you exchange traded funds or ETFs and ETFs are exactly what they sound like they are funds that are traded on an exchange and here's how they work what happens is an asset manager let's call her Joan goes out and buys a bunch of assets and those assets can be anything they can be Lo loans they can be stocks they can be bonds they can be Commodities like gold or silver or padium anyway she takes those assets and she puts them into a fund and she treats this fund just like a company in that she can sell shares of it issue shares that can be bought by anybody in the public and that includes 16-year-old Ethan which makes him very happy now what happens is these Shares are listed on an exchange just like a company shares are listed on the NSE or the NASDAQ and if the assets in the fund improve in value it means that the shares are going to go up if the assets depreciate in value then the shares are going to go down now the great thing about ETF is that they're really really simple to use all right you can buy and sell them at any time they're also relatively low cost you don't have to worry about paying huge fees to investment managers are they better or worse than index funds well it really depends on what it is that you want to achieve but before you go rushing out and buying ETFs make sure you consult an investment manager because he or she can help you make the decision about what kind of investment to buy so it doesn't leave you very badly needing a drink

Channel: Marketplace APM

Views: 59,210

Keywords: ETFs, gold, stocks, S&P 500, assets, exchange traded funds, funds, shares, marketplace, explainer, whiteboard, Paddy Hirsch, NYSE, diversification, economics, Borrow, Spend, Cost, Supply, Demand, Big banks, Put up dough, Stake, Trust fund, Exchange, Barter, Vend, Offer, Auction, Traffic, Unload, Deal, Dump, Hustle, Recession, Austerity, Financial crisis, Thrift, Layoff, Field, Trade, Work, Career, Livelihood, Occupation, Vocation, Commerce, Financial affairs, Money, Accounts, Economy, Analysis, News, regulation

Id: 83DoOBBsKYk

Length: 2min 2sec (122 seconds)

Published: Mon May 26 2014