What is an ETF and is it a safe investment for me?

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Have you wondered what an ETF is? And if it's a safe investment for your portfolio? Well, this was a question my oldest son asked me a few months ago. And I wanted to share with you what I told him.

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Well stay tuned, because today we're going to dive into the specifics of this popular investment vehicle.

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And we're going to explore how it aligns with your financial goals, and Christian values. Now, I can't promise that you'll be an expert by the end of the show, but you'll certainly have more knowledge.

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And as I always say, knowledge is empowering. Imagine having the power to invest in diverse range of companies with just one simple transaction. That's the beauty of ETFs.

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They offer a convenient and potentially lucrative way to grow your wealth. But as with any investment, it's crucial to understand the ins and the outs. Before taking the leap.

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Welcome back to the show, where we explore the intersection of faith and finance. I'm your host, and I'm thrilled to have you join me on this journey as we move towards financial freedom and spiritual growth.

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Now, before we dive into today's topic, I want to express my gratitude for your continued support and engagement. Your questions and feedback fuel the show, so please keep them coming.

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In yesterday's episode, we discussed the valuable role of credit counseling services in helping individuals navigate debt and hopefully improving their financial standing.

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If you missed it, I highly recommend giving it a listen to gain a better understanding of how these services can support you on your financial journey.

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Now, looking ahead to tomorrow, we're going to explore some great alternatives to traditional personal loans. You know, the ones you get at the bank or the credit union.

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We'll discuss some options that may better suit your unique financial situation, and more importantly, those that align with your values as a Christian. So be sure to tune in for that valuable information.

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As we prepare to discuss ETFs, as always, let's ground ourselves in God's wisdom. The book of Proverbs chapter 21, verse 5 tells us, "The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty."

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This verse truly reminds us of the importance of careful planning and due diligence when it comes to our investments.

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We can't just bury our heads in the sand and not look for opportunities for putting our money to work. God entrusted us with this and we needed to put it to work.

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So now, let's dive into the world of ETFs. ETF stands for Exchange-Traded Fund, which is a type of investment vehicle that combines both the features of stocks and mutual funds. ETFs are composed of a basket of securities.

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That's really what they are. Those could include stocks, bonds, or other commodities, and these ETF funds are traded on stock exchange, just like individual stocks. Now, one of the primary advantages of ETFs is their diversity.

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By investing in an ETF, you gain exposure to a wide range of companies or those assets in a single transaction.

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This diversification can help mitigate the risks. It's going to lower the amount of downside potential and it also doesn't make you rely on the performance of one company, which could have a dramatic impact on your overall portfolio.

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It's sort of that idea about not putting all your eggs in one basket and let's face it. Most of us don't know enough about these individual companies to really risk our life savings. Another benefit of ETFs is their liquidity.

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Unlike some other investment vehicles, ETFs can be bought and sold throughout the trading day. This provides investors with greater flexibility and control over their overall portfolios.

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Now, when it comes to purchasing ETFs, as my son learned, the process is relatively straightforward. You can buy ETFs through a brokerage account just as you would with any individual stocks.

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In fact, many online brokers offer a wide selection of ETFs and some even provide commission-free trading for certain funds.

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And that's something you want to look for. You want to find a brokerage account that gives you some way to commission free trade, because you don't want to lose what you've gained by paying fees.

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Now, however, it's essential to recognize that ETFs, like any other investment come with pros and cons. Now, on the positive side, ETFs often have lowered expense ratios compared to actively managed mutual funds.

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A lot of people don't realize when you invest in a mutual fund, you're paying that fund manager a percentage of what you're getting in your return.

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So, you might be getting a 12% return, but what kind of fee are you paying? So, if you're using these ETFs, this can translate to more of your money working for you.

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Additionally, the diversification offered by ETFs can help smooth out the ups and downs of the market, potentially providing a more stable investment experience and listen, that's what we're all trying to do.

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You know, we've got these peaks and valleys in the market and what these ETFs, the thought is, they're going to help smooth those things out so that you continue to grow over time.

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Now, on the other hand, ETFs are not without risk. I want to be clear about this. The performance of an ETF is tied to the performance of underlying assets.

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So, if those assets that are underlining experience a downturn, the value of your ETF is likely going to follow suit. And here's another thing. Some ETFs may be more volatile or complex than others.

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So, it's absolutely crucial that you research and you understand a specific fund you're considering before investing. Now as Christians, it's important to approach investing with a focus on stewardship, and alignment with our values.

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So, when you're evaluating is ETFs, consider the companies and industries represented in the fund. Some investors may choose to avoid ETFs that include companies involved in activities that conflict with their faith.

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Those could be things such as abortion, pornography or gambling. The cool thing about these funds is you can try to select, include companies which match your personal beliefs.

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You could always look and see what that fund represents. What are the businesses they're having in their fund.

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So, let's move on to some actionable steps, and that's step number one is research and compare various ETFs to find ones that align with your financial goals and your values.

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Number two. Evaluate the expense ratios and the historical performance of potential ETFs. This is where you're going to look and see how has this ETF performed.

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And then also look at what kind of expenses they're charging the investors. Let's move on to number three.

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And then you're going to determine how ETFs fit into your overall investment strategy and your risk tolerance. All of us have an overall investment strategy, and each of us has a level of risk we're willing to take.

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Let's look at number four and that's pretty simple. Open a brokerage account if you don't already have one.

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And finally, moving on to the last thing. Number five, start with a small investment and regularly monitor your ETFs performance.

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Now look, I'm not by any means suggesting you go out and make these financial decisions on your own.

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I will always recommend finding a financial advisor who can meet with you and explore to maximize returns and reduce your risk.

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You just got to find somebody to fit your needs and is great at communicating. The last thing you want is somebody as a broker that you can't communicate with.

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Who is always telling you what to do, but it's not giving you a good explanation of why you're doing it. So, let's do a quick recap.

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In today's episode, we explored the world of ETFs and their potential role in your investment portfolio.

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We discussed the benefits of diversification. We discussed the benefits of liquidity, as well as the importance of aligning your investments with your Christian values. Remember this.

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Investing is a journey that requires careful planning, it requires due diligence, and you have to have that long-term perspective. I want to remind you to visit our website.

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That's at askralphpodcast.com and join our email list for exclusive content and updates. And as an incentive, when you join our email list, I'm going to be offering you a complimentary copy of my book at books called Mastering Your Finances.

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You get that just by signing up for email list and here do me a favor.

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If you found value in today's episode, please share it with others who may be interested in learning more about ETFs and other faith-based investing. Don't forget to send your questions to the show.

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Your inquiries truly drive the content we create, and it helps us better serve you on your financial and spiritual journey. I love to get your questions and I love to answer them.

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So, as I always say, stay financially savvy, and may God bless you abundantly.