Stocks Vs Etfs
You can trade stocks for both long term investing as well as short term day trading
. So how to go about trading stocks?
There are thousands and thousands of stocks listed on the different stock exchanges in the world. Out of these thousands and thousands of stocks, only a few have the potential of making you rich in 2010. In US alone, more than 50,000 stocks are listed in the different stock exchanges like NYSE, NASDAQ, AMEX etc. Start the year 2010 with identifying ten best performing stocks in your opinion.Identification of these ten best performing stocks mean that you need to study these stocks in detail.
Focus on its price action and how well it matches with the S&P 500 Index. Before you invest in any stock, observe it for at least one week and do not put any money into it unless you probe it thoroughly and feel comfortable with it.
In the past few years, Exchange Traded Funds or what you call ETFs have become highly popular. ETF share can be traded like a stock with no uptick rule that can prevent you from shorting it. In addition to that an ETF gives you the diversification benefits of a mutual fund with less fees as compared to the mutual fund. ETFs are a much superior investment right now as compared to directly investing in stocks or mutual funds.
You can sell as share of a mutual fund until the close of the trading day whereas you can always buy or sell an ETF share just like a stock. You can think of ETFs as stock indexes as most of these ETFs have been designed in such a manner as to mimic a stock index or a sector index or a industry index.
Another advantage of ETFs are that they are not so news dependent as compared to individual stocks. Individual stocks tend to react violently to breaking news as compared to ETFs.
So what are the best stocks to invest in 2010? Should it be a micro cap, a mid cap or a large cap or a growth stock or a value stock. Investing in micro cap stocks comes with a dream. The dream of picking a micro cap stock that will sky rocket into a mid cap and eventaully into a large cap give you a huge ROI. The rewards can be astronomical and your percentage gains larger than you expected. Though the chances of you picking the right micro cap stock is pretty slim!
So what to do? Shatter your dream of making a fortune in 2010? No, not at all, invest in Micro Cap ETFs. Yeah, Investing in Micro Cap ETFs will provide you with more diversification as compared to investing in a individual micro cap. If a few micro caps soar, the micro cap index will also soar with them giving you rewards that might not be as large but they will be less risky! Micro cap ETFs is just one example. There are many ETFs that mimic different indexes, commodities or currencies. Explore the world of ETFs in 2010! You can reap huge rewards!
by: Ahmad Hassam
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