As you may know, investing is one of the more popular ways for individuals and families to build their funds and plan effectively for their futures. But if you’re unfamiliar with what you are doing in that particular realm the whole process can seem rather overwhelming, can’t it? Well, if you’ve made a decision to make an investment move you have taken that first step…now it’s about learning and acting in accordance to what you learn so that it works out to your financial benefit. The ETF is one form of investing that is somewhat popular, but like any other, it has both its benefits and its setbacks. For one thing, they differ from stocks, which are another option. They have their good points and their bad, however, only you can decide if an ETF is right for you. Below is information to help you figure that out. First, we’ll breakdown the ETF itself and help you get a better grasp on what you may be dealing with. Then we’ll delve deeper into the soybean ETF specifically. So, read on to see if the ETF is an investment option that is right for you.
The Soybean ETF: What Is It, and How Can It Work For Me?
If you are an old hand at investing, you are likely quite familiar with the ‘exchange-traded fund’, or ETF, but for those of you who aren’t, we figured we’d touch base for you. While differing from actual stocks, an ETF is a collection of funds or securities which can include stocks. Any number of things can be invested in when it comes to ETFs, including our topic, soybeans. It is called an ‘exchange traded fund’ due to the fact that they can be exchanged, just like stocks can. This process is not like that of mutual funds, as those are NOT traded on the exchange. They do, however, have the benefit of being diverse, just as mutual funds have. Soybean ETFs are exchange traded funds which are based on soybeans, and they give investors something of a peek into the future of soybeans. There is no need for a futures exchange account with this ETF. The investor is better able to make good investment choices with this option, and therefore see better returns for their money.
Here is a brief explanation of how soybean ETFs work:
- The owner of the assets, or ‘fund provider’, creates a fund to track asset progress
- The fund provider sells parts, or ‘shares’, of that fund to those investing (the shareholders own the shares, but not the assets)
- Investors get ‘lump dividend payments’ in return, which can also be turned around and reinvested
- Buyers and sellers are able to trade the stock during the day on the exchange for financial gain
When it comes to soybean ETFs in particular, it is said that they are a great investment for younger investors for several reasons. First, there are low fees involved, which is ideal for those just starting out. Secondly, they make management easy due to the wide variety of choices. They are also easy to liquidate, and there are many to choose from. However, there are downsides to soybean ETFs as well. For example, according to Investopedia, Some of the setbacks that investors may experience, and need to be aware of and on the lookout for, include:
- Pay Attention to Fees – While ETFs are typically a low-fee investment choice, you can find prices that are a bit jacked up, and may be taken for a bit of ride
- ‘Capital Gains Distribution’ – This type of return involves the payment of a ‘capital gains tax’, so be aware of this before investing
- Unseen Risks and Fluctuations – There are going to be times when the finer, more important changes, and the risks that come with them, are not immediately apparent…dig before investing!
- Difficulty with Liquidation – Sure, most soybean ETFs are going to be easier to liquidate than others, but there are times when difficulty could be encountered. Know the outlook before putting your money in There are many fine points to investing, so the key is to be knowledgeable…educate yourself well before putting your money into anything, and you will find that you have less regrets in the end. So, how should you go about investing in this fashion?
How to Invest in An ETF
So, what do you do if you want to get started? If you have a total lump sum it’s fairly easy. Just consider the amount you are working with, figure out how many shares you want to purchase (as well as the cost of commission for the broker), and make the purchase. Shares can also be bought through what is called ‘dollar-cost averaging’. With this method you take the same lump sum and split it up into monthly purchasing increments. Some months you may buy more, others you will buy less; it all depends on the cost at the time. If share prices are lower one month, you will be able to buy more shares. Keep in mind that since ETFs are traded as stocks are, you will be paying that commission to your broker, which will also be a factor each month in how much you are able to buy, since brokers make commission according to price. Remember that ETFs are considered to be less of a risk that other forms of investing, which is another good reason to consider them. Regardless, you will find purchasing your soybean ETFs is quite simple, with the right education and guidance.
The Bottom Line
Soybeans are popular and safe investment typically. Of course, there are always risks, but when it comes to this particular asset and ETFs, the truth is that you will be playing it fairly safe when comparing this form of investing to others. Soybean ETFs have proven to be fairly dependable and easy to learn about for future investments, since the use of soybeans and their production is so prevalent. So, if soybean ETFs are an investment strategy you have been considering, be sure to learn all you can, get a broker you trust, and move forward. Best wishes to you as you invest.
Written by Allen Lee
Read more posts by Allen Lee