What Assets to Choose: The Power of ETFs

A Look at the Markets: Tesla

We can see from the chart above how Tesla’s stock is fluctuating between areas of mild support and resistance. First, it hit support, then resistance, and now it’s back to support again.

What happens next will largely depend on how the market reacts to last night’s highly anticipated robotaxi event. Elon Musk has been discussing robotaxis for several years, and this innovation is considered a crucial part of Tesla’s future. In fact, fund manager Cathie Wood places significant value on the potential of Tesla’s robotaxi business.

Would you consider buying a car that could act like a driverless Uber while you’re not using it?

What Assets to Choose: The Power of ETFs

Last week we looked at the concept of Dollar Cost Averaging (DCA). This week I want to answer the question about what assets to invest in, especially for those people who do not want to spend time analysing the financial markets in detail.

Keeping it Simple

Investing doesn't need to be complicated.

Exchange-Traded Funds (ETFs) are like shopping baskets that hold many different companies' stocks all at once. When you buy an ETF, you're instantly investing in hundreds or even thousands of companies. This approach gives you immediate diversification.

Building wealth can be as simple as choosing an ETF with a broad range of stocks covering different sectors and countries.

Why Choose World ETFs

If I had to invest in only one asset, it would be a World ETF.

World ETFs offer exposure to companies from every corner of the globe, from established markets like the US and Europe to emerging economies in Asia and South America. These funds automatically adjust their holdings based on each company's size and importance in the global market, making them a truly hands-off investment option. Plus, because they're passively managed (meaning no expensive fund manager is actively picking stocks), they typically charge very low fees.

Your money works harder when you keep costs low.

Getting Started with ETFs

You don't need to be a financial expert to invest wisely.

Most major investment platforms offer a wide selection of World ETFs to choose from, often with minimal investment requirements. Look for terms like "MSCI World Index" or "FTSE All-World Index" in the fund's name, as these are common global market benchmarks. Remember that while there are ETFs focused on specific regions or sectors, a broad World ETF provides the most comprehensive diversification for long-term investors.

Always seek independent financial advice before investing.

Don't Put All Your Eggs in One Basket

Diversification is your financial safety net.

Imagine investing all your money in a single ice cream shop - if summer is rainy, or a competitor opens nearby, you could lose everything. This is why smart investors spread their money across different investments, like owning shares in ice cream shops, umbrella stores, and indoor entertainment venues. By diversifying, when one investment performs poorly, others might perform well, helping to protect your overall wealth.

Protection comes from spreading your risk.

Types of Diversification

There are many ways to diversify your investments.

You can spread your money across different types of companies, from tech giants to food producers. You can also invest across different countries, protecting yourself if one country's economy struggles. Additionally, you might choose different types of investments altogether, like combining stocks with bonds, real estate, and commodities like precious metals.

Note that the World ETF we discussed above is only one type of asset class (stocks) and investors may like to consider other types of investment for ultimate diversification.

The Modern Way to Diversify

Technology has made diversification easier than ever.

Today's investors can achieve instant diversification through tools like ETFs and mutual funds, which pool money from many investors to buy hundreds of different investments. These investment vehicles make it possible to own tiny pieces of many companies with a single purchase, even with a modest amount of money.

As in the above section, this is not financial advice and investors should seek independent financial advice.

Idiom of the Day: Put Your Eggs in One Basket

Put your eggs in one basket - idiom - to depend for your success on one person or plan of action