Exchange Traded Funds (ETFs)
The very first stock market purchases that you make will likely be in Exchange Traded Funds as these provide diversification. The entire reason for investing in the stock market is that the average value creation of companies is quite positive over time. To help address the issue of risk, investment firms have created baskets of stocks called Exchange Traded Funds (ETFs). Because these ETFs are made up of many stocks bundled together, the impact of poor performance of one or even several of the firms, is reduced. This then allows you to get the “average” value creation of the companies that make up the ETF. We include an example later in this chapter that illustrates this in detail. It is also possible to buy fractional shares of an ETF. (Reference the list of firms that allow fractional share trading in the “Resources” section.) Fractional shares can be purchased for as little as $5. The