Profit From The Panic 43
Buying Markets & Sectors in Crisis Part 1
In the previous chapter, you would have learnt that stock markets always recover from downturns. They then eventually bounce back higher than before. How do we take advantage of this? What’s the best bet buy for the market rebound? Well, the simplest sure-win strategy is to just BUY THE MARKET. In other words, buy the index.
Using Exchange Traded Funds to Buy the Market Well, in reality the index is not on sale. However, you can buy what is called an Exchange Traded Fund (ETF), which tracks the market index you are investing in. There are ETFs that track the Dow Jones Index, the S&P 500 Index, the Nikkei 225, the Straits Times Index and etc. The process of buying an ETF is exactly the same as how you would buy any other stock. It is listed on the index like a stock. However, instead of buying a share in one company, you are actually buying a basket of top stocks that make up that index. In a sense, an ETF is a vehicle constructed like a unit trust/mutual fund, but with the convenience and liquidity of a stock.