ETFs are baskets of stocks that typically aim to track the performance of a stock market index. As of late, ETFs have been getting more popular and more understood among investors and are now considered a viable investment option.

Listed on a stock exchange where shares of listed companies are traded, ETFs can be index-driven, focusing on specific indexes or sectors.

In general, etf investing will diversify your investment risks by buying into a basket of different stocks. In this way, if the value of a particular stock in the basket dips, the rest can easily make up for the loss through their individual gains.

As an example, one ETF invests in stocks of the top 30 construction companies in your country in proportion to the respective index weights of each stock. You can imagine the amount of leverage generated when a large group of like-minded investors put in a small amount each into this ETF.

So rather than keep all your cash in a local bank earning a low interest return, you may wish to place a portion of your cash reserves in different Exchange Traded Funds. First you’ll want to understand the benefits of investing in an ETF and make sure you know the disadvantages as well.