Market GraphsBuying exchange traded funds or ETF’s may just be like buying any other form of equity. But just like any other investment, buying ETF’s require some due diligence, especially if you wish to consider them as part of your investment portfolio. Here are some of the important things to consider before deciding on buying that ETF.

Know Your Aim And Purpose

Before buying that ETF, you should be able to have an aim and purpose in mind. Buying an ETF should be part of your own investment strategy rather than just a random investment. After all, such investments become a part of your bigger portfolio that should work together to give you the most favorable options possible.

Determine Holding Period

Before buying an ETF, you would also have to decide beforehand whether you would be having it for the short term or as a long term investment. Which way you decide will help you choose the right type of ETF to buy. There are both advantages and disadvantages in investing in ETF for the long term and the short term. It is important for investors to know them before trying to buy into ETF’s.

Know The ETF Assets

Before investing on a certain ETF, you should consider knowing what asset holdings it includes. Although ETF’s offer investors a stake at a variety of markets and industries, that doesn’t mean that investors no longer have to check the ETF’s collection of asset holdings. Some of the assets included can sometimes affect the overall performance of the ETF. Extensive research on this would help investors choose among the better performing ETF’s to invest into.

Tax Considerations

Investing in ETF’s may also have an effect on your tax return. Although ETF’s from the US do have tax advantages, those that come from other countries may not. And taxes incurred when buying ETF’s may differ from region to region. It is important to consider how a certain ETF may affect your income tax before you invest in them.