Have you heard of ETFs? They stand for Exchange Traded Funds and are described as a “particularly valuable instrument for those starting out in this investment universe,” according to Grupo Ageas Portugal.
“In today’s financial scenario, taking the first steps in the world of investments may seem complex. However, there are tools that simplify this process,” the company explained in a statement.
So, what are ETFs?
Grupo Ageas Portugal explains that they are like an “investment vehicle that is traded on the stock exchange, just like a stock.”
However, “instead of individual stocks, by investing in one of these funds, a diversified portfolio of assets, such as stocks or bonds, is automatically acquired.”
“Most ETFs replicate a market index, which means that you indirectly invest in many companies at once,” the statement noted.
Four characteristics of ETFs
Grupo Ageas Portugal believes they are “ideal for beginner investors” because they have the following four characteristics:
- Simplified Diversification: The main advantage for beginners. With a single ETF, the investment is automatically distributed across many assets, sectors, or geographies. This significantly reduces the risk associated with investing in a single company, protecting the capital from more substantial fluctuations.
- Accessibility and ease: These funds are traded on the stock exchange, allowing them to be bought and sold as easily as an individual stock. Liquidity is adequate, and the minimum investment amounts are generally low, making them accessible to small investors.
- Reduced costs: Compared to many actively managed investment funds, ETFs have lower management fees. For those just starting, every euro saved in costs means more capital working for you.
- Transparency: The composition of ETFs is public and continuously updated, which allows you to know exactly where your money is invested.
However, it is important to consider that “even though they are a good starting point, information is the key to a conscious and safe investment,” according to Ageas Portugal, which also offers the following tips:
- Research and Understanding: It is crucial to spend time researching and understanding what the ETF contains, the index it replicates, and the associated risks. Past performance does not guarantee future results, so analyzing strategy and market perspectives is very important.
- Attention to Total Costs: Besides management fees, there are transaction costs (brokerage, bid-ask spreads). Information on all costs is essential to assess the impact on the investment.
- Portfolio Diversification: ETFs are an excellent starting point, but combining them with other financial products (Financial Insurances, PPRs) can create a more robust portfolio aligned with long-term goals.
“In Portugal, as in the international market, investing in ETFs is possible through most banks and brokers. These instruments represent an important and simplified gateway to the world of investments. The key to success lies in information and conscious decisions, as investment in financial knowledge is the best asset for any investment journey,” the statement emphasized.
