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In the vast majority of cases, they are traditional online brokers that offer a variety of asset classes - such as stocks, bonds, mutual funds and, of course, ETFs. As a result, the investment process works much the same as with any other brokerage.

For example, you need to find a broker that meets your requirements and then open an account. After verifying your identity, you then need to deposit money. Once your account is set up, you'll need to choose an ETF to invest in. If you haven't entrusted your money to a mutual fund, you'll need to invest on a DIY basis.

How do ETFs work?

ETF brokers make the investment process very simple. However, if you've never invested in an ETF before, it's important to do some research before parting with your money. Take a look at the following basics.

Physical ETFs vs. CFDs.

When you invest in a physical ETF, it means that the broker is actually investing in the asset. For example, let's say you invest in an ETF that tracks the Dow Jones Index. In doing so, the ETF broker would buy shares of the 30 companies that represent the Dow.

In addition, the ETF broker will balance its purchases to reflect the index on a comparable basis in https://exnesscom.com/trader-app/. For example, if Walt Disney makes up 5% of the Dow Jones in terms of weighting, the ETF broker's portfolio will contain 5% of Walt Disney shares.

Alternatively, you can opt for a CFD broker that gives you access to ETFs. In doing so, the CFD broker will track are the real price of an ETF market, but not the purchase of the underlying assets.

From the particular investor, CFDs function similar to a physical ETF provider, although you will often find that fees and commissions are much lower.

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Long vs. short

An added benefit of investing in ETFs is that you have the ability to take long or short positions in your chosen market. For those who don't know, going long means you are investing in the value of the asset.

In the case of short selling, you are speculating that the price of the ETF will fall. While all ETF brokers allow you to take a long position on a market, you must use a CFD broker if you want to take a short position.

  •     If you want to go long an ETF, you must place a buy order
  •     If you want to short an ETF, you need to place a sell order.

ETF Markets

When you select an ETF to invest in, there are tens of thousands of markets to choose from. With that in mind, there are some standout assets that ETFs track, and that's why most ETF brokers give you access.

Below we have listed the most commonly traded ETF markets.

  •     Equity Markets: as mentioned above, ETFs allow you to invest in the broader equity markets. For example, if you want to gain exposure to the US economy, you can invest in an ETF that tracks the S & P 500 or Dow Jones. If you want to stay in the UK market, you can invest in the FTSE 100.
  •     Ties: ETFs are a great way to gain access to bond markets that would otherwise be difficult to access. The focus is on foreign government bonds, which are only sold in minimum lot sizes of 6 or 7 figures.
  •     Real Estate: Some ETF brokers offer real estate investment trusts (REITs) that seek to track a specific real estate market. This way, you can invest in real estate without having to buy a home directly domestically or internationally.
  •     Legal Marijuana: The legal marijuana space is already a multi-billion dollar industry. Therefore, it was only a matter of time before a marijuana ETF came to fruition. In fact, there are a few ETFs to choose from, most of which track marijuana growers and suppliers.
  •     Interest rates: you can also invest in an ETF that tracks interest rates. This is a great way to tie your investment to a specific currency.
  •     Commodities: If you want exposure to a commodity such as gold, oil, natural gas or wheat, you can easily do so with ETFs. Again, there is norequirement to own or store the underlying asset, so you can short the commodity as well.

The above list is not exhaustive. In fact, there are many other markets that you can follow with ETF brokers.