However, if you need advice on where to place your money, it is important that you contact a professional for help. This will allow you to learn from experience within the market and avoid investing in placed that offer a limit on your returns. You may also want to have a mutual fund performance comparison done by a qualified professional. This will allow you to see the advances to investing in the NASDAQ or SP 500. It is likely that you are unaware of potential returns on investment for each of these. This is why a professional would be very helpful, you can place your money in the correct type of investment and this will help you to make money in the stock market.

ETFs are pretty much mutual funds but better.  On top of that, any kind of fund you can think of probably has a corresponding ETF.  Whether it’s a passively managed fund like index funds or actively managed funds that have very specific investment strategies or follows certain sectors, it is likely that you will be able to find an ETF for it.

ETFs are basically a basket of stocks chosen either by a computer, in the case of a say index funds, or actively picked by a money manager.  In this regard it’s very much like a mutual fund.

But there are 2 basic differences that set them apart from mutual funds.  First is that they are traded just like stock on the open exchange.  Accordingly, instead of the sometimes super costly management fees or expense ratios associated with mutual funds, you simply pay your normal trading commission to buy or sell an ETF.

In addition, with an ETF you can trade it all day long.  With mutual funds you are only allowed to enter or exit at the end of the trading day.  You are not allowed to go in and out during the trading session.

This can be a problem if there is a major news break regarding a sector or stock that is involved with your mutual fund.  If, for example, you own mutual funds that track the natural gas industry and there is major news that comes out that will tank all natural gas stocks, you have to wait until the end of the trading session to get out.

With natural gas ETFs, you can sell immediately, possibly saving you a ton of money.  And you only have to pay the trading commissions as if you were selling shares of stock.

There are so many benefits to ETFs that there is no doubt the investment industry will continue to come out with more and more of these financial instruments.  In fact, I would be that the mutual fund industry is on a steady decline and will be replaced by exchange traded funds.  There are too many advantages without other disadvantages that in the aggregate, they are a better deal in the end.

You Choose How Much You Risk On a Stock

Always a great suggestion for when you are starting out, after having paper-traded for a while (trading with fake money as you practice a strategy), you can begin by opening a small account.  Many brokers allow you to open with very small accounts, often as low as $250 according to what I’ve seen.  The mantra is ‘never trade with money you can’t afford to lose’.  If you feel like $500 might be a good amount to start out with, you can give that a try.  Just make sure that if you somehow lost it all, it wouldn’t be totally devastating to your financial well-being. How do you prevent losing it all? I’ll talk about that briefly in the next section.

You Can Cut Your Losses Short Using Stop-Losses

Contrary to any type of ‘crash’, be it big or small, when you are doing your own trading you are able to assess your own risk tolerance, and place trades accordingly.  Let’s compare this to say, your 401k or a mutual fund you might have some stake in. Somewhere around the end of 2008 the stock market began to tank pretty bad. Many people had 401k’s or owned mutual funds that were affected by this. After polling a few open friends about this, it seemed to me that many saw losses up to 40 and 50% of their portfolio! On the other hand, those such as myself who take care of their own retirement are able to set what is called a ‘stop-loss’ on any given trade that will pull it out when it reaches a certain point.  As an example, if I had $20,000 in my account and had one trade open, I would be able to set a stop-loss that might close the trade if my account balance reached $19,000, making it so I would suffer only a 5% loss.  A far cry from the 50% that some people have seen recently. It’s this exact reason why I don’t understand why some people claim that trading your own money is more dangerous than things like mutual funds or 401k’s.

Buying Stocks is a Very Simple Process

Lastly, I think that some people are turned away from the idea of buying stocks because they think that opening a trading account will be a difficult process.  This simply is not true.  As I remember, the last time I opened an account it was all done online, and was only a couple of pages.  Most of this was material that you are supposed to read, with a few spaces to fill out. After that it takes about two or three days to be approved, and you can find yourself trading in no time.  You are able to deposit money into your trading by sending a check or by bank wire, and in some cases you can even fund your account with a credit card. Withdrawing money? That is where all the fun is.  You can also do this in the same way; a check to your doorstep, or bank wire.