How to Make Money with ETFs

If you’re in your 20s and 30s and wish to retire comfortably with a tidy sum of cash, you need to start making money from multiple income streams now.

A quick example: a 22-year old person starts saving and investing $1,000 a year and earning an average return of 8 per cent per annual can accumulate at least $250,000 by 62, which is right about the time for retirement.

However, if this youngster spends flippantly now and begins investing only ten years later, he would now need to put in at least twice as much, $2,200 a year, to hit that quarter million dollars by 62.

So, start thinking about savings and investing into multiple income streams right now because the longer you put this off, the harder your money needs to work to reap the same benefits!

Buying into Exchange-traded Funds or ETFs is one such income stream you can consider. ETFs are baskets of stocks that typically aim to track the performance of a stock market index. Lately, ETFs have been gaining popularity among investors as a viable investment option.

Listed on a stock exchange where shares of listed companies are traded, ETFs can be theme-driven, focusing on (for example) the gold or agriculture sectors.

In general, using a small outlay, a single ETF will diversify your investment risks by buying into a basket of different stocks. In this way, if the value of a particular stock in the basket dips, the rest can easily make up for the loss through their individual gains.

For example, ABC ETF invests in stocks of the top 30 construction companies in your country in proportion to the respective index weights of each stock. You can imagine the amount of leverage generated when a large group of like-minded investors put in a small amount each into ABC ETF.

So rather than keep all your cash in a local bank earning a low interest return, you may wish to place a portion of your cash reserves in different ETFs.

Over time, any gains made will most certainly earn you much more cash than through bank interest returns alone. Furthermore, because ETFs are traded in stock exchanges, you can actually start earning cash within a week or so, if stock conditions are favorable.

Remember: making money from multiple streams of income is important for creating a beautiful retirement for yourself.