Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
Investment and Options Strategist
Summary: This introductory article in the ETF Investing: From Zero to Hero series explains what ETFs are, how they work, and why they are a popular investment choice, offering flexibility, diversification, and lower fees. It also provides actionable portfolio examples and a curated list of key ETFs to help investors build a diversified portfolio.
Exchange-traded funds (ETFs) are becoming incredibly popular, and for good reason. They offer a straightforward and affordable way to invest in a wide range of assets—like stocks and bonds—without the complexity of picking individual investments. This is the first article in our ETF investing: from zero to hero series, designed to take investors from beginner to expert. In this episode, we’ll break down what ETFs are, how they work, and why they are an excellent choice for investors. The article also provides actionable examples of ETF portfolios and a curated list of core ETFs to know, helping investors take practical steps toward building a diversified portfolio.
An exchange-traded fund (ETF) is an investment fund that pools together money to buy a collection of different assets, like stocks or bonds. Investors can buy and sell shares of this fund on a stock exchange, just like they would buy or sell a company’s stock.
Quick start tip: Saxo Bank’s platform offers a comprehensive ETF screener that lets investors filter ETFs based on themes, sectors, and regions. This makes it easy to find an ETF that matches an investor's financial goals and interests.
Let’s break down how ETFs are different from other popular investment options:
Simple analogy: Think of a mutual fund like a bakery that sells fresh bread only at 5 PM every day—investors have to wait for that time. An ETF is like a grocery store that’s open all day, so bread is available whenever it’s convenient.
Actionable tip: Investors interested in knowing how much they could save by using ETFs instead of mutual funds can use tools and resources available through Saxo Bank to compare costs. Seeing how fees impact investments over time could help in making more informed decisions.
ETFs are a favorite for both beginner and experienced investors. Here’s why:
Actionable insight: ETFs are ideal for capturing market trends. For example, if an investor believes clean energy is a long-term growth area, they could explore options such as the iShares Global Clean Energy UCITS ETF (ISIN: IE00B1XNHC34) or the Amundi MSCI New Energy ESG Screened UCITS ETF (ISIN: FR0010524777), which provide exposure to this sector.
ETFs have evolved significantly since the launch of the first one, SPDR S&P 500 ETF (SPY), in 1993. This product allowed investors to access the entire S&P 500 index with one purchase. Today, there are ETFs for almost every market and theme imaginable, including technology, real estate, bonds, and commodities like gold.
Current opportunities: New ETFs are continually being introduced to match emerging trends, like sustainability or artificial intelligence. Staying informed on these trends through Saxo Bank’s research tools can help investors find new opportunities for growth.
Here’s why ETFs are such a valuable tool for investors:
If an investor is ready to build a diversified portfolio, here are two sample mixes with multiple options to demonstrate different approaches:
This example focuses on achieving broad diversification and risk management through global exposure:
This example focuses on long-term growth, with exposure to different markets and sectors:
These examples demonstrate different approaches to building a diversified portfolio. Remember, these are illustrations intended to show how ETFs can be used to create a balanced or growth-focused investment strategy, providing multiple options to avoid favoring specific products.
This is the first episode in our ETF investing: from zero to hero series. ETFs offer a straightforward, flexible, and cost-effective way to diversify a portfolio. Whether an investor wants exposure to global markets, specific themes like clean energy, or a mix of assets for balance, there are various ETFs available to meet different investment needs.
Getting started with Saxo Bank: Investors who are ready to invest can use Saxo Bank’s platform, which provides everything needed to buy the first ETF. Simply log in, use the ETF screener to find an ETF that fits the investor's goals, and enter the ISIN code to make a purchase. Saxo also offers research tools and resources to help choose the right ETF for a portfolio.