Trading ETFs is a great way to get exposure to shorter-term price movements within certain sectors. When you trade ETFs with CFDs, you can use leverage to get amplified exposure to the ETF of your choice.
As a result, CFDs enable you to open a position for just a fraction of the cost of traditional investing. This means that, while leverage can magnify your profits, it can also magnify your losses. This is because loss is calculated based on the full size of the position rather than the cost of opening that position and can far outweigh any initial deposit, so it is important to create a risk management strategy before you trade.
An exchange-traded fund (ETF) is a basket of securities that trades on an exchange just like a stock does. ETF share prices fluctuate all day as the ETF is bought and sold; this is different from mutual funds, which only trade once a day after the market closes.
"You can get broad-based diversification with one ETF, commonly referred to as diversified ETFs, or you can build a portfolio of five to 10 ETFs that would offer good diversification," he says. The choice you make on the above depends on your investment goals and risk appetite, like any investment.
Stocks represent a piece of ownership in a publicly traded company.ETFs are a bundle of assets and securities such as different stocks and bonds. A single ETF can contain dozens or hundreds of different stocks, or bonds or almost anything else considered an investable asset.
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