Now that we have figured out what stocks and bonds are, of course we will ask what is the most popular ETF in recent years?
The full name of ETF is "Exchange Traded Fund". Simply put, it packages many stocks or bonds into a basket, allowing you to buy a whole basket at one time.
ETFs can be bought and sold like stocks, but they actually contain many assets.
Common ones include those that track the overall stock market (such as Taiwan 50), bond ETFs (such as US Treasury ETFs) or industry themes (such as AI, electric vehicles, etc.).
Compare the three types and what are their advantages and disadvantages?
stock:
Buying part of a company
Big increase, possible dividends
There are big fluctuations. If a single company goes bankrupt, you will be ruined too.
Like betting on a single star player
Bonds:
Lending money to companies and governments
Stable interest
The profit is not high, and we are worried about interest rates and inflation.
Like a FD but with a bit of adventure
ETFs:
Buy a whole basket of stocks or bonds
Disperse risks and facilitate operation
There are management fees, but it will still fluctuate with the market
It's like buying an all-star team, not worrying about a player suddenly making a mistake.
For those who don’t have time to watch the market and only want to make a profit but don’t want to lose money, here is an example of investment type configuration:
Young people, with time and the ability to take risks
Stocks 60%, Bonds 10%, ETFs 30% (Growth)
Middle-aged, with a family, afraid of accidents
Stocks 30%, Bonds 40%, ETFs 30% (Steady)
I want to retire and just want easy passive income without worries
Stocks 10%, Bonds 60%, ETFs 30% (mainly bonds)
Comparison of actual examples:
You buy a TSMC stock: → You believe it will continue to dominate the wafer world, but if it falls, you fall with it.
You buy a government bond: → You get a fixed interest rate, and your principal is returned to you upon maturity, but when inflation comes, it's like the money has become smaller.
You buy a Taiwan 50 ETF: → You directly invest in the 50 largest companies in Taiwan by market capitalization. You don’t have to worry if one company performs poorly because the others will help support it.
Why are ETFs suitable for beginners?
You don't have to choose the stocks yourself, mainly because you don't know how to choose. Buying one is equivalent to buying a lot. It is easy to operate and most importantly, it is cheap. It is suitable for long-term, regular and fixed-amount investments to slowly make money, and it is most suitable for the sense of security you need.
If you are just starting to invest, ETFs are definitely your best entry tool. They are safer than single stocks and more flexible than bonds.
Once you get started with ETFs and slowly understand what investing is, then add a little stock for growth and a little bond for stability, you'll look like someone who... at least knows what he's doing.
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