One of the advantages of investing in Exchange Traded Funds (ETFs) is that most of them are cheap.  By that I mean they have very low expenses.  Which means more of your money is working for you.

So how do the EFT providers do that?  To answer that question, we have to look at how they pick what’s in a fund, and how they manage it.

And there are a couple of ways.  I think of them as the traditional way and the newer, cheaper way. And we’re about to look at both of them.

In recent posts, we’ve been looking at ways to diversify our investments with ETFs focused in different areas. And here is another interesting one for you.

So, to diversify our investments even further, we can invest in emerging markets with the VWO Vanguard Emerging Markets Stock Index Fund. Investing in the VWO is investing in stocks of the emerging markets around the world, including China, Brazil, Mexico, Russia, South Africa and others. It has 4694 stocks, so buying VWO is buying a very large part of all of the emerging market stocks.

You can think of emerging markets as Read the rest of this entry »

To diversify our ETF investments further, lets look at the VPL – Vanguard Pacific Stock Index Fund.  As the name implies, investing in the VPL is investing in the stocks of the Asia-Pacific region.  It has 2497 stocks, so buying VPL is buying a large part of all of the Asia-Pacific stocks.

People invest in international stocks like the Asia-Pacific fund to further increase their diversification.  Because, like we said, when the US stock market is down, the Asia-Pacific stocks may be up.  And that’s where Read the rest of this entry »

Okay, so in prior posts we’ve just looked at US stocks.  But there’s a whole world out there, and it has many profitable businesses, and stocks, as well.

And we know that diversification within our US stocks can lower risk.  Because it kind of evens out the ride, i.e. when some stocks go down, others may go up.

Similarly, adding international stocks can increase our diversification.  Because sometimes when the Read the rest of this entry »

After looking at large companies stocks ETFs in recent posts, we have started looking into small company stock ETFs.  So why would we do that?  After all, large companies typically have well established products and a well-established financial history.

However, their big growth days may be behind them.  So investing in them is less risk, but perhaps less reward.  And so the value of their stock may be less volatile, swing up and down less, be more stable and less heart stopping.

On the other hand, people can invest in small, newer companies.  And they do that because their big growth days could still be ahead of them.  Of course, they don’t have as much Read the rest of this entry »