ETFs: Investing in Gold without Buying Any Bars

Definitely, one of the financial instruments that have revolutionized Stock Market Investing are ETFs. For nearly 20 years, ETFs have provided small investors with the opportunity to invest in almost any asset. Since the first ETF came out in 1992 (which tracked the S&P 500 index) these securities have not stopped growing, to such an extent that currently there are more than 1000 ETFs trading in all the markets of the world.

An ETF (Exchange-Traded Fund) is a security that replicates the movement of a basket of assets. Although ETFs can replicate any asset, generally they track the performance of an index.

Like any traditional fund, an ETF is an investment vehicle that uses a pool of assets and is managed by professional investors (Portfolio Manager) who invest the fund's capital according to the objective to replicate by the ETF.

However, the fundamental difference between ETFs and any traditional fund is that they can be bought and sold in the Stock Market like any common stock (in the case of traditional funds the trading operations can only be made through a company or bank).

Today, ETFs can track the performance of almost any index or asset: from specific market sectors to commodities and currencies. They can even track assets on a leveraged or inverse way.

Taking the S&P 500 as reference asset, in the market there are ETFs that replicate this index in the same proportion or multiplied by two, or even ETFs that replicate the index in the same proportion or multiplied by two, but inversely. In the last case, for example, if the S&P 500 falls 0.25% (-0.25%), the ETF that replicates twice the inverse of the index, will rise 0.5% (+0.5%). As well as for the S&P 500, we may find inverse and leveraged ETFs for many other assets, so the investment universe is really huge.

Without going any further, in the case of commodities, ETFs offer the opportunity to invest in Gold or Oil, in the same way as if we were buying or selling stocks of any company. Thanks to ETFs, there is no longer need to buy bars or barrels! All we need is to have an opened account to invest in the Stock Market.

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