ETFs can be a great way to profit in the long term. If you want to get into investing and do not know which stocks to buy and hold ETFs can be a great benefit to you. And here is why.
1. Already Diverse
ETFs are already diverse. If you buy an ETF you are buying something that tracks many different companies and possibly many different sectors. So instead of you trying to find 20-30 different companies to hold you can simply invest in a couple big ETFs.
That would give you the power to have a diverse portfolio which is great for the long term.
2. ETFs Pay Dividends
Many ETFs will pay a nice little dividend. That is a great added bonus to owning a diverse portfolio. There are even income ETFs that you can search for if your interest is mainly in the dividends.
3. Covered Calls
Many ETFs will also allow you to sell covered calls on it so you can make an even higher income off of it. When you sell a covered call you are selling someone else the right to buy your ETF from you at a given price on or before a given date, so you might end up getting called out.
But if you sell the call with a strike price that is higher than the price you paid for it you would stand to profit from exiting the position anyways. Covered calls are also a good way to pull out an income and make up some of the loss when the ETF is going through pullbacks.
4. Most Mutual Funds Don’t Beat The Market
Most mutual funds do worse than the market average. Well there are ETFs out there that allow you to buy the market average. In other words these funds allow you to beat the majority of mutual funds.
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