What are Exchange Traded Funds (ETFs)? and How to properly invest in them

If  I am to explain an ETF to a 3-year-old kid I’d say;  Exchange-traded funds (ETFs) are like baskets of stocks. When you invest in an ETF, you're buying shares in a group of stocks such as tech stocks, or healthcare stocks. When you buy an ETF, you get a little bit of all the stocks that are in it. If a stock in the ETF does well, your ETF will increase in value too, so it's like owning a bunch of different stocks, but in just one share.

Exchange-traded funds (ETFs) are investment funds that are traded on a stock exchange. The underlying investments vary, but they typically track an index such as the S&P 500, bond market index, or sector index. ETFs offer broad and diversified exposure to a portfolio at a lower cost than traditional mutual funds. They are also more liquid than most mutual funds, allowing for easier entry and exit. They are taxed differently than mutual funds, and offer different levels of transparency. ETFs are one of the most popular investment products available.

5 STEPS TO START INVESTING IN ETFs

1. Research ETFs: Before investing in Exchange Traded Funds (ETFs) in 2023, the investor needs to research all the available ETFs and their performance, fees and other details. This can be done through online portals, databases and financial publications.
2. Choose an ETF: Once the investor has completed his/her research into the different ETFs available and the performance of each, he/she will need to choose which ETF to invest in. Factors to consider when making a decision include the type of ETF, fees, risk, and return.
3. Open a broker account: Once the ETF has been chosen, the investor will need to open a broker account to place trades on the stock exchange. A broker such as E*trade or TD Ameritrade can be used to place trades in an ETF.
4. Submit a limit order: Once a broker account has been opened, the investor can enter the symbol for the ETF and then submit a limit order to purchase the ETF. A limit order is an order that defines the maximum price the investor is willing to pay for the ETF.
5. Monitor your investments: Lastly, the investor should closely monitor their investments to make sure that they are performing as expected and to take advantage of any opportunities with the ETF if they arise. This can be done through the brokerage's website or software program.