Getting back into the market is nerve-wracking enough, let alone picking the stocks that you think are winners; by using exchange traded funds (ETFs) you can take the guesswork out and mitigate some of your risk.

If you are thinking about getting back into the market but do not want to play a guessing game, a low-cost indexing approach may be the answer for your portfolio. Index funds take the guesswork out of investing by tracking the performance of an entire market sector, says Barbara Drury for the Sydney Morning Herald. The cost is much lower than paying a manager to pick the stocks for you in a traditional mutual fund, giving the ETF another plus.

There are two types of index fund: listed exchange-traded funds (ETFs) and unlisted index funds, and there are about 800 or so in the United States. ETFs can also be used as a tactical tool as they allow investors to trade them throughout the day just as you would a single stock. ETFs also have good tax advantages where earnings are given untaxed to investors.

Full Story:  http://www.etftrends.com/2009/04/how-to-be-a-better-investor-with-etfs.html

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