Stock picking isn’t for everyone. And for those looking to own US stocks for the sake of international diversification, the process of picking the right stock can be just as tedious. An alternative to buying individual stocks is to buy an exchange-traded fund (ETF). ETFs make the task easier as they are structured almost much like a mutual fund. The main difference between ETFs and index funds is that the former can be bought or sold during stock exchange trading hours.
An ETF purchase can be used to invest in hundreds of companies or bonds, or you can diversify across industries or themes. For example, the INVESCO Nasdaq 100 ETF, ticker QQQ, aims to track the investment performance of the NASDAQ 100 Index before fees and expenses. Similarly, the Invesco China Technology ETF aims to track the investment performance of the FTSE China Inc. A 25% Technology Capped Index (net of fees and expenses). It essentially gives you easy access to the Chinese tech sector. Industry-specific ETFs are also an option. One of the ETFs that track the publicly traded stock values of the companies in the Energy Select Sector Index is the Energy Select Sector SPDR Fund.
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The SPDR S&P 500 ETF Trust (SPY), also known as the SPY ETF, is the ETF to use when investing in S&P 500 companies. SPY’s performance closely mirrors that of the S&P 500 Index. Buying SPY ETF gives you exposure to some of the top US companies across 11 key sectors of the S&P 500 index. The S&P 500 Index is typically considered the best single indicator of US large-cap stocks. Information technology, healthcare and communications services are the top three industries in the S&P 500.
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Invesco QQQ ETF is the ETF to buy to invest in Nasdaq 100 stocks. With just one investment, the QQQ exchange traded fund gives you access to all Nasdaq 100 companies, including Apple, Google, Microsoft and more. In addition, QQQ introduces investors to companies that are pioneering long-term disruptive trends including augmented reality, cloud computing, big data, mobile payments, streaming services, electric vehicles and more.
ETFs make it easy and affordable to gain exposure to a market that would otherwise be difficult to invest in. US ETFs provide exposure to a range of hot topics in the US stock market, as well as the benefit of diversification into foreign stocks.