Nils Larsen Manager Explains Why Exchange Traded Funds Are Great For New Investors
If youâ€™re new to financial markets, you may find the prospect of investing quite intimidating. Where there is a potential for reward, there are also risks. So while you might make money, you might also lose money. Nils Larsen, a renowned financial manager, believes that starting with Exchange Traded Funds (or ETFs) is a smart first step for many investors.
â€œFact is, a lot of professional investors and financial managers struggle to beat markets,â€� Nils Larsen says, â€œif the S&P 500 gains say 15 percent in a year, a lot of professional investors will struggle to beat that. Many will earn less, say 10 or 12 percent.â€�
By investing in Exchange Traded Funds, your performance will be pegged to the performance of stock indices. So if the NASDAQ gains 20 percent, youâ€™ll gain roughly 20 percent. We say roughly because youâ€™ll also have to pay some fees, but with the right ETFs, fees are quite reasonable.
Exchange Traded Funds also offer a great way to minimize risks while still enjoying strong profit potential. Throughout history, American stock indices have crashed but eventually recovered. Historically, if you held onto your stakes in ETFs you would have eventually made money.
Further, ETFs can help mitigate risks.
â€œIf you speak with a financial expert or manager, theyâ€™ll often stress the importance of diversification,â€� Nils Larsen notes. â€œWith an ETF, youâ€™re diversified because your investment is tied to the performance of hundreds of stocks, not just one.â€�
Some day financial markets might collapse completely. Still, most financial advisors think that this is unlikely, especially in the near future. If the economy enters into a recession, you may suffer temporary losses with ETFs, but youâ€™ll likely recover. Companies, however, go bankrupt all the time and their stocks often become worthless.
Exchange Traded Funds also typically offer low management fees. Indeed, the average ETF carries an expense ratio of just .44%, which means youâ€™ll pay out about $4.40 in costs for every $1,000 you invest. Expense ratios for mutual funds and other assets, on the other hand, can exceed 1 or even 2 percent.
â€œETFs are easy to manage, offer affordable fees, and still provide great earning potential,â€� Nils Larsen says. â€œAs a financial manager, I often recommend these funds to my clients.â€�
Financial Manager Nils Larsen Talks About Brushing Up On Your Investment Knowledge
Of course, many people want to be proactive with managing their wealth and would prefer not to park all of their money in an exchange-traded fund. Fortunately, you can increase your knowledge of financial markets and investment opportunities.
â€œItâ€™s smart to talk with professional investors, like financial managers and wealth advisors,â€� Nils Larsen says, â€œbut you should also increase your own knowledge. Financial news sites like the Wall Street Journal, investment-specific education sites, and even classes at your local community college can all provide a wealth of knowledge.â€�
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