Knowing how to invest: after all, what are ETFs?

ETF: The gateway to the world of investments. In Portugal, like the international market, investing in ETFs is possible through most banks and brokers.

In the current financial scenario, taking your first steps into the world of investments can seem complex.

However, there are tools that simplify this process. In a statement sent to ZAP, they make some of them available to us.

The financial institution highlights the Exchange Traded Funds (ETF) and explains why they are a particularly valuable tool for those just starting out in this universe.

After all, what are ETFs?

In short, Ageas summarizes an ETF as “an ‘investment vehicle’ that is traded on the stock exchange, just like a share”.

But (in detail)), instead of individual shares, when investing in one of these funds you automatically acquire a diversified portfolio of assets, such as stocks or bonds.

Most ETFs replicate a market index, which means that if invests indirectly in many companies at once.

Ideal for beginner investors. Why?

• Simplified diversification: The main advantage for those starting out. With a single ETF, the investment is automatically spread across many assets, sectors or geographies. This significantly reduces the risk associated with investing in a single company, protecting capital from more pronounced fluctuations.

• Accessibility and ease: These funds are traded on an exchange, which allows them to be bought and sold with the same ease as an individual share. Liquidity is adequate, and minimum investment amounts are generally low, making them accessible to small investors.

• Reduced costs: Compared to many actively managed investment funds, ETFs have lower management fees. For those just starting out, every euro saved in costs means more capital working for you.

• Transparency: The composition of ETFs is public and permanently updated, which allows you to know exactly where the money is invested.

Attention: Information is the best weapon to avoid risks

Even though it is a good starting point, information is the key to a conscious and safe investment. As the Ageas Group states in the statement, there are some things you should do before proceeding with this type of investment:

• Research and understanding: It is essential to invest time researching and understanding what the ETF contains, the index it replicates and the associated risks. Past performance does not guarantee future results, therefore, analyzing the strategy and market perspectives is very important.

• Pay attention to total costs: In addition to management fees, there are transaction costs (brokerage, bid-ask spreads – i.e. the difference between the best purchase price and the best sale price). Information on all costs is essential to assess the impact on investment.

• Portfolio diversification: ETFs are an excellent starting point, but the combination with other financial products (Financial Insurance, PPRs) can create a more robust portfolio aligned with long-term objectives.

The key to success lies in information and conscious decisions, as investing in financial knowledge is the best asset for any investment path.

In Portugal, similarly to the international market, investment in ETFs is possible through most banks and brokers.