Once you get the fundamentals down, learning how to purchase and sell exchange-traded funds (ETFs) is a piece of cake. We explore a few different facets of the procedure and respond to inquiries regarding ETF accounts, the duration of holding an ETF prior to sale, and if it is possible to buy and sell an ETF on the same day.
Where to Buy ETFs
During the course of the trading day, ETFs are bought and sold. You may purchase ETFs through any online broker, just like stocks, so be sure to thoroughly investigate the brokerage account you intend to use before deciding which one is best for you.
DO I NEED A SPECIAL ETF ACCOUNT?
Without the requirement for a specific ETF account or additional order costs, you can buy and sell ETFs at a reasonable price using an online brokerage account.
Mutual fund shares, on the other hand, are not listed on stock exchanges. Instead, investors purchase and sell mutual funds through a range of distribution channels, including through investment professionals (full-service brokers, independent financial planners, representatives of banks or savings institutions, or insurance agents), as well as directly from fund companies.
DO YOU NEED TO HAVE A MINIMUM AMOUNT TO BUY ETFS?
In the past, the cost of one share plus any applicable charges and fees was the minimum an investor had to pay to purchase an ETF; however, make sure your broker permits fractional share purchases of the ETF you’re interested in. ETFs typically cost a lot less than mutual funds.
Buying ETFs in a Few Easy Steps
However, there are a few simple measures you can take to ensure you make wise selections before you start buying ETFs and adding them to your portfolio.
OPEN YOUR ACCOUNT TO BUY AND SELL AN ETF
You can open a joint account or an individual account if you want to buy ETFs for general investing. Select a reliable brokerage company with helpful customer service and technical support in case any problems occur or you have inquiries regarding your investments.
At this point, you should also choose whether you want to handle the management of your ETF portfolio yourself or hire a professional to do it.
RESEARCH ETFS YOU ARE INTERESTED IN
Doing your homework is one of the most crucial aspects in buying an ETF. Before making an investment, make sure you comprehend all the details of your fund, including:
- whether the ETF is actively or passively managed; who manages the ETF;
- previous performance;
- ratio of costs;
- if it does, what index does it follow? and
- Related charges.
To keep track of the ETFs you might want to buy, use My Portfolio on AAII.
How Long Should You Hold an ETF?
For long-term investors, ETFs can be excellent building bricks, but it’s crucial to understand how long you should hold them and when you might want to sell. ETF investments can offer investors a number of advantages, including wide exposure to many industries and sectors as well as assistance in lowering overall portfolio risk.
Long-term investors might keep an ETF that meets their needs for decades in a perfect world, especially if their objective is to fund retirement. You’ll be able to determine how long you should keep an ETF before selling it, though, based on your monitoring strategy.
WHEN SHOULD YOU SELL AN ETF?
Since your unique goals, risk tolerance, and allocation should be taken into account, there is no general rule for when to sell an ETF. Selling an ETF, however, is never a good idea if you:
- beginning to experience pressure from abrupt market falls or crashes,
- Want to liquidate before achieving your goals but need money right away,
- received unfavourable news recently regarding an ETF without investigating financial measures or prior data points.
Additionally, selecting ETFs with adequate liquidity and trading volume is crucial. This is due to the ease with which one can act rashly and sell an ETF without first confirming its liquidity. Low liquidity could cause the ETF to sell at a share price that is momentarily below market value.
Resources to Make Buying ETFs Even Easier
It’s crucial to understand your options when it comes to buying and selling ETFs, but how can you choose which particular ETFs to include in your portfolio? Members of AAII have access to tools that can be used to identify the best ETFs for their needs.
You can use the A+ Investor ETF+ screener to assist you select ETFs by entering the precise criteria and qualities you are looking for in an ETF.