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Hands-on guide: how to start investing in ETFs today

This is episode 5 in our ETF investing series. ← Go to episode 4: How to choose an ETF: key metrics and practical tips

Ready to begin your ETF investing journey? This step-by-step guide will walk Saxo Bank clients through the process of starting an ETF portfolio, from setting clear goals to executing your first trade.

Step 1: define your investment goals

Before selecting any ETFs, clarify what you're investing for. Your goals will shape your entire investment approach.

Practical exercise:

• What am I investing for? (Retirement, home purchase, education, etc.)
• What is my time horizon? (5 years, 10 years, 20+ years)
• How much risk am I comfortable taking? (Conservative, moderate, aggressive)
• Will I need regular income from these investments?

For example, a 35-year-old Saxo Bank client investing for retirement in 25 years might prioritize growth-oriented ETFs and accept higher volatility, while someone five years from retirement might focus on stability and income.

Step 2: create your ETF investment checklist

Develop a systematic approach to evaluating and selecting ETFs to avoid impulsive decisions.

Sample checklist:

• Does this ETF fit my investment goals and time horizon?
• Is the expense ratio competitive compared to similar ETFs?
• Does the ETF have sufficient assets under management (preferably €100M+)?
• Is the ETF's liquidity adequate for my trading needs?
• Have I reviewed the ETF's historical tracking error?
• Have I read the key information document (KID)?
• Do I understand what's in the ETF's underlying index or portfolio?

Step 3: set realistic expectations

Understanding what to expect from your ETF investments helps you stay committed during market fluctuations.

Reality check:

• Broad market ETFs have historically delivered average annual returns of 7-10% over long periods, but with significant year-to-year variation
• Even well-diversified portfolios can experience temporary declines of 20% or more during market corrections
• The power of ETF investing comes from consistency and time, not from trying to time market movements

Step 4: perform due diligence

Before investing, gather the information you need to make informed decisions.

Due diligence process:

• Use Saxo Bank's ETF screener to filter funds based on your criteria
• Compare 3-5 similar ETFs side by side, noting differences in expense ratios, holdings, and performance
• Review each ETF's KID document for standardized risk and cost information
• Check if the ETF is domiciled in a tax-efficient jurisdiction for your situation
• Verify if the ETF is accumulating (reinvests dividends) or distributing (pays out dividends) based on your preference

Step 5: create your ETF portfolio plan

Decide on your overall asset allocation before placing any trades.

Sample starter portfolio:

• 60-70% in broad market equity ETFs (global, regional, or country-specific)
• 20-30% in bond ETFs appropriate for your risk tolerance
• 5-10% in specialized ETFs aligned with your specific interests or convictions

Step 6: place your first ETF trades

With your plan in place, you're ready to execute.

Execution tips:

• Consider using limit orders rather than market orders to control your purchase price
• Avoid trading during the first and last 30 minutes of the trading day when prices can be more volatile
• Start with your core holdings (broad market ETFs) before adding specialized positions
• Document your reasoning for each purchase to review later

Step 7: implement a regular review process

Set a schedule to review your ETF portfolio, but not so frequently that you're tempted to overreact to market movements.

Suggested review calendar:

• Monthly: check that automatic investments are processing correctly
• Quarterly: review performance against benchmarks
• Annually: comprehensive portfolio review and rebalancing if needed 

By following this structured approach, Saxo Bank clients can build ETF portfolios aligned with their financial goals while avoiding common pitfalls that derail investment success.

Next up: ETF strategies for beginners: building a diversified portfolio