ETF Investing 2022: How and which ETFs to buy for long-term investments?

throttll
October 3, 2021
ETF investing has long been one of the simplest forms to create in a short time in a large portfolio of different assets.
etf-investing

ETF investing has long been one of the simplest forms to create in a short time in a large portfolio of different assets.

We looked at which ETFs are best suited for an investment, which providers are suitable for the investment and what you should consider as a trading beginner.

In this way, we clarify the difference between ETFs and conventional funds and look more specifically at different types of ETFs.

In addition, we do not miss the opportunity to offer our guide that explains how and where best to invest in ETFs.

Table of Contents

What is an ETF?

ETF is an abbreviation for the English term Exchange Traded Funds. It is, therefore, a sub-type of fund that can be freely traded on common stock exchanges.

They can therefore be compared with other assets such as stocks. They are made up of these but can also contain other values ​​in the portfolio.

ETF versus fund – differences explained

The differences between ETF and traditional funds are not too great. Rather, a fund is the umbrella term for ETFs. In other words, an ETF is always a fund, but not every fund is also an ETF.

The main focus of ETFs is that they can be freely traded on exchanges. Their value is, of course, defined by the managed assets, but their supply and demand mechanisms also play a role in pricing.

This cannot happen to a fund in the traditional sense. Normally you have to pay a minimum amount into such a fund and then pay annual costs, which occur with an ETF.

The best ETFs in 2021

Of course, anyone who wants to invest in an ETF naturally wonders which assets can be counted among the best ETFs. We have put together a list of the best performers of the past months and years.

It should be noted here that in some cases, we are only showing the values ​​that serve as the basis for ETFs.

Depicted value / index

Performance 2021

Annual performance

3 years

Ethereum cryptocurrencies124.29%943.44%
Cryptocurrencies Bitcoin ETF109.11%
Equity World Health Care Foxberry Medical Cannabis & Life Sciences45.31%146.55%
Equity North America Health Care Medical Cannabis and Wellness Equity41.17%145.49%
Bitcoin Cash cryptocurrencies38.28%90.22%
Equity World Technology Elwood Blockchain Global Equity37.69%198.05%
Equity World Energy S&P Commodity Producers Oil & Gas Exploration & Production35.73%88.73%-17.26%
Equity United States Energy S&P 500 Energy Sector35.56%61.95%-13.06%
Equity United States Energy S&P Energy Select Sector34.87%64.13%-11.11%
Equity United States Energy MSCI USA Energy33.86%59.47%-14.35%
Equity United States Nasdaq US Buyback Achievers Select29.51%102.70%63.37%
Equity United States Financials S&P 900 Banks 7/4 Capped29.33%80.97%
Equity United States Infrastructure Solactive US Energy Infrastructure MLP26.86%129.41%6.97%
Equity World Energy MSCI World Energy26.29%44.25%-12.14%
Equity United States Small-Cap MSCI USA Small Cap Value Weighted25.21%101.63%51.99%
Equity United States Dividend Dow Jones US Select Dividend23.95%50.73%37.96%
Equity United States Energy Morningstar MLP Composite23.38%95.03%-9.65%
Equity North America Energy Dividend Alerian Midstream Energy Dividend21.71%
Equity United States Small-Cap S&P SmallCap 60021.03%82.15%50.79%
Equity United States Value MSCI USA Enhanced Value21.00%53.81%40.70%
Equity Europe Consumer Discretionary STOXX® Europe 600 Optimized Travel & Leisure19.64%83.98%12.81%
Equity United States Value MSCI USA Value Weighted19.31%57.23%44.17%
Equity United States Financials S&P Financials Select Sector18.91%53.60%38.36%
Equity Europe Automobile STOXX® Europe 600 Optimized Automobiles & Parts18.86%97.36%10.72%
Equity United States Financials S&P 500 Financials Sector18.84%53.63%38.16%
Equity United States Financials MSCI USA Financials18.77%54.31%37.45%
Equity Europe Automobile STOXX® Europe 600 Automobiles & Parts18.75%95.29%12.27%
Equity World Agribusiness S&P Commodity Producers Agribusiness18.68%63.88%44.34%
Equity Europe Consumer Discretionary STOXX® Europe 600 Travel & Leisure18.38%
Equity Europe Financials STOXX® Europe 600 Banks18.34%35.16%-19.33%
Equity Europe Financials MSCI Europe Banks18.28%29.46%-22.90%
Equity Europe Financials STOXX® Europe 600 Optimized Banks18.02%39.76%-18.89%
Equity United States Low Volatility / Risk Weighted S&P 500 Low Volatility High Dividend18.01%39.94%30.44%
Equity Europe Financials EURO STOXX® Optimized Banks17.96%44.23%-24.03%
Equity Europe Financials EURO STOXX® Banks17.64%44.09%-22.81%
Equity World Basic Materials VanEck Natural Resources17.62%66.91%38.41%
Equity World Value MSCI World Enhanced Value17.40%38.79%19.49%
Equity United States S&P 500 Buyback17.37%64.30%55.71%
Equity World Financials MSCI World Financials17.16%48.91%23.12%
Equity World Technology Social / Environmental Nasdaq Yewno Global Future Mobility17.03%78.15%
Equity Japan Dividend WisdomTree Japan Equity (USD Hedged)17.01%31.78%29.15%
Equity Europe Financials EURO STOXX® Banks 30-1516.81%42.92%-23.80%
Equity United States Fundamental / Quality FTSE RAFI US 100016.73%55.63%53.05%
Equity United States Value MSCI USA Prime Value16.53%52.59%56.01%
Precious metal palladium16.05%3.14%174.65%
Equity United States MidCap S&P MidCap 40015.66%70.07%50.15%
Equity World Nasdaq Global Buyback Achievers15.16%62.47%51.68%
Equity World Private Equity S&P Listed Private Equity14.76%67.54%56.51%
Equity United States Small-Cap MSCI USA Small Cap14.58%80.17%57.88%
Equity World Private Equity LPX Major Market®14.44%65.73%54.23%

An analysis of the best ETFs shows that other cryptocurrencies are represented among the top values. This shows the potential of the crypto industry.

However, ETFs can also successfully map indices or manage companies in the portfolio that shine above all through high dividend payments.

Best providers to invest in ETFs.

Exchange-Traded Funds. The name is the ETF investing program. After you can trade the financial stocks on stock exchanges, you only need one access. Modern online brokers guarantee this.

But before you rush to the first offer, let me tell you that there are sometimes significant qualitative differences between the ETF providers.

We recommend the Cypriot broker TradeATF as our test winner, which also enables inexpensive investments in ETFs in SouthAfrica.

Investing in ETFs with TradeATF in 3 steps

etf-investing

The asset growth in ETFs is particularly simple and cost about TradeATF. Finally, the values ​​can be bought and sold again without any trading fees.

So let’s clarify in the following how you can invest in an ETF on the trading platform.

Register

First of all, registration is required. The account will eventually become the basis of our new ETF portfolio. In the course of the registration, you will have to enter various data.

This includes the name, address and some background information on previous financial knowledge. You also choose a password and confirm it.

TradeATF is a broker from the European Union and therefore also implements European guidelines. Verification of the data is therefore also carried out during the course of the registration.

This ensures that an investor is also a natural person who does not engage in illegal money laundering. For the user, it means: have an identity card and an address confirmation ready.

Deposit

The diversity of the offer also extends to the available payment methods. As an investor, you can use PayPal, for example, to then invest in ETFs.

Alternatively, you can comfortably switch to credit cards or other payment providers such as Skrill, Neteller, Sofortüberweisung or Trustly, among others.

Most payment methods require a minimum deposit of $ 200. A traditional bank transfer only has a minimum deposit of $ 500.

However, this is not a fee, as the money can be used in full for trading.

Payment optionpossible?
Invest in ETF with a credit card✔️
Invest in ETF with PayPal✔️
Invest in ETF with Skrill✔️
Invest in ETF with bank transfer✔️
Invest in ETF with Neteller✔️
Invest in ETF with UnionPay✔️

Invest in ETF

You can now invest in ETFs. To do this, select the desired value from the overview or use the functions of the CopyPortfolios to copy other traders.

Make sure, however, that the ready-made trading portfolios can also contain CFD positions, which are associated with an increased risk and a different fee structure.

Types of ETFs

We have now clarified how you can invest in an ETF. So let’s dig a little deeper into the subject and check which different ETF types are available on the market.

Physically

A physical ETF replicates a certain index in great detail. This property is about the so-called replication of the values. Physical ETFs are characterized by a slightly higher cost structure.

After all, it can mean a considerable effort for the administrators to track the prices of the underlying stocks one-to-one at all times. Usually, such ETF variants are linked to a manageable number of assets.

However, there are also physical ETFs that rely on partial replication, i.e. only use certain values ​​from an index. So-called tracking deviations can occur between the actual index and the ETF price.

Synthetic

Synthetic is by no means a term that can only be assigned to the financial sector. You’re always dealing with something artificial. In contrast to physical ETFs, synthetic ETFs do not use real stocks but rather derivatives.

We have already explained how a CFD paper works. A synthetic ETF is also set up according to the same principle. The corresponding assets can be acquired relatively inexpensively, but they also carry a significantly higher risk.

Distributing

Anyone who browses the financial world looking for more information on ETF investing will come across a distinction between distributing and accumulating.

Which variant is more suitable for the investor depends on the investment period as well as on the desired strategy. Distributing ETFs generate regular returns, which therefore go back to the trader.

These can then either be reinvested individually or used for other purposes.

Accumulating

An accumulating ETF does the exact opposite of a distribution. It does generate returns but invests them again immediately.

The advantage here is clearly the possible total return, which is significantly higher due to the so-called compound interest effect than with distributing ETFs. However, this only applies if the general performance of the asset is also positive.

Investing in ETFs – Pros and Cons

Why is it so popular these days to invest in ETFs? The advantages can hardly be denied for the private investor.

It is a relatively simple form of investment that is less risky than individual assets that you invest yourself.

In addition, the trader saves time, which would not be insignificant for his preparation and management of the portfolio.

  • ETF funds contain broadly diversified stocks
  • Asset accumulation is possible with ETFs
  • You can freely decide which ETF you want to invest in
  • Large indices are mapped
  • annual costs
  • Risks in ETF trading too

However, in the financial world, you can also see more and more critics warning against the ETF market. After all, they ensure that more and more investors are looking for fewer and fewer companies.

This leads to a general increase in the price of the indices., which also makes the ETFs themselves, which are traded on the stock exchange, become expensive. The egg legend Wollmichsau was not given here.

Furthermore, no ETF can guarantee profits. More experienced traders are also likely to complain about the lack of flexibility. After all, you have to let the fund managers do their work and cannot make changes to the composition of the ETF individually at their discretion.

No matter how much money you can ultimately invest in ETFs, you also have to take into account the annual costs when calculating your profit, which usually does not arise with a normal share portfolio.

etf-investing

ETFs as a long-term investment and retirement provision

The asset growth in ETFs is certainly an excellent use case for this Finanzgut. So you can have part of your capital managed professionally without any major effort.

Long-term charts prove time and again that they are capable of generating wealth. Thus, both investments and ETF savings plans are suitable as a successful means of retirement provision.

Important key figures for the ETF investment

ETF funds also have to be judged somehow. If you do not want to simply rely on the recommendations on this page, then it is best to consider the following key figures in order to be able to compare the different offers.

Accumulating or distributing

We have already explained these two terms. Of course, it plays a significant role for the investment whether profits are distributed or reinvested.

This has an impact on the long-term performance as well as on the price trend of the asset.

Replication

Before investing in ETFs now, be sure to look at replication beforehand. Is 100 percent replication offered here, or is there a partial replication?

If the latter is the case, the so-called tracking error occurs, which leads to a particular discrepancy between the selected index and the ETF.

NAV

The NAV denotes the net asset value, in SouthAfrica, the net asset value. One can also speak of intrinsic value. The iNAV, on the other hand, is the intraday key figure.

The NAV is a very important factor, as it describes the value of the actual portfolio of the respective ETF and not the value at which the fund is traded on the stock exchange.

If you recognize too large a discrepancy here, you should act a little more cautiously, as the respective ETF could be overbought.

TER & TCO

With the TER and the TCO, key figures were given on the costs of the ETF. For the trader, the TER is particularly relevant, as the annual rate for investment is specified here.

So these are costs that have to be taken into account when holding the respective asset.

performance

Many traders first look at performance. This shows how skilfully the fund managers have acted.

In the case of ETFs with partial replication, in particular, a single ETF can leave the price increases of an index behind.

In which ETFs to invest – ETF portfolio for beginners

etf-investing

MSCI World

How about an investment in the whole world? The MSCI World is a share index that tracks company shares from 23 countries. No wonder that numerous ETFs have taken this index as their basis.

After all, you can choose from over 1500 individual companies that generally make up the MSCI World. Once you have oriented yourself towards the global economy via such an investment, you can assume that the risk is relatively low.

ACWI

ACWI is an abbreviation for the MSCI All Country World Index. Here, too, you are dealing with a global index. However, the ACWI goes one step further than the classic MSCI World.

Finally, stocks from the 23 industrialized nations are also joined by stocks from 27 emerging markets. Almost 3000 companies belong to this index, and investors can use an ACWI ETF  to represent around 85% of the total global market capitalization.

Emerging markets

Those who are not afraid of a little more risk and trust growth in emerging countries should opt for an emerging markets ETF. The increased risk has the advantage of significantly higher returns.

Values ​​from China and the Asian region, in general, are particularly well represented here. Thus, an investment could be worthwhile especially for long-winded traders.

ETF portfolio for monthly dividends – with only 3 ETFs for passive income

# 1 iShares STOXX Global Select Dividend 100 UCITS ETF (DE) (WKN: A0F5UH)

As the name of the iShares STOXX Global Select Dividend 100 UCITS ETF suggests, 100 companies that offer the most significant dividend distributions worldwide can be represented here.

Companies from Europe, the USA and Asia are represented.

# 2 SPDR S&P Global Dividend Aristocrats UCITS ETF (WKN: A1JKS0)

The SPDR S&P Global Dividend Aristocrats UCITS is a physical ETF that is also on the lookout for groups with, particularly high dividends. The fund managers use companies from all over the world.

# 3 Invesco FTSE Emerging Markets High Dividend Low Volatility UCITS ETF (WKN: A2AHZU)

The Invesco FTSE EM High Dividend Low Volatility UCITS ETF is an ETF from Ireland. Dividend ETFs in particular, are often burdened with a relatively high level of volatility. The Invesco Fund manages with comparatively low volatility of around 16.4%.

Automated additional monthly income

In a way, it is the hallmark of dividend ETFs to allow regular distributions. If you avoid investing in a reinvesting ETF, you can secure an additional monthly income in this way.

However, if the trader is looking for long-term returns, it makes sense to bet on compound interest and choose an accumulating ETF that directly reinvests the profits from dividends.

Should you still invest in ETFs now?

ETFs are not linked to a specific point in time. But of course, you want to acquire the assets particularly cheaply. It is therefore advisable to pay attention to market developments.

It may be advisable to consider actively managed funds that are constantly changing their composition. However, you will then hardly choose ETFs with 100 percent replication.

Investing in ETFs Conclusion: is a long-term investment better than stocks?

etf-investing

ETFs can only be compared to stocks to a limited extent. There are two completely basic approaches to investing.

While the stock trader independently selects certain values ​​and leaves them in the depot or actively trades, ETF investors are interested in a broad diversification and certain automation of the investment.

If you want to take it to the extreme in this regard, you can also choose between various Robo Advisors, but in addition to the ETF costs that are incurred anyway, further service fees are also due.

Ideally, you should opt for an investment mix that consists of both managed ETFs with lower risk and any stocks that specifically complement the portfolio.

Such a portfolio can be built up particularly well with our test winner, TradeATF, as stocks and ETFs, in particular, can be bought without trading fees.

4.9
4.9/5

Our recommendation: Trading at Investby

Our recommendation: Trading at Investby

  • The broker provides an Islamic Account
  • It provides a dedicated account manager
  • Receive customised investment news
  • Trade with a variety of assets
  • There’s no deposit limit
ABinvesting Review
4.5
4.5/5

Our recommendation: Trading at ABInvesting

  • Acknowledge the financial markets through education material 
  • Free VPS is available 
  • Get a swap discount of 50 per cent 
  • Islamic Account is available to traders 
  • Select account types of your interest
4.9
4.9/5

Our recommendation: Trading at PrimeFin

  • Fifth decimal available 
  • Spreads begin from 0.03 pips
  • Commission is zero  
  • Full 10-hour support  
  • News alerts and VPS for traders

FAQs

This page has outlined the different benefits of ETFs. If the prices are favorable, then an ETF investment should be worthwhile in this sense.

You have capital, but again have the time and leisure to deal more closely with the investment, then an ETF can do real work for you. Even beginners should be pleased with the possibility of managed and automated portfolios.

We recommend investing via TradeATF, as you can trade ETFs here for free.

Of course, this depends on the one hand on the available capital. On the other hand, one should bear in mind that the financial products are also associated with annual costs that are based on the amount invested. An overall portfolio should therefore consist of a mix of different assets.

Get a Callback

A trusted broker will contact you today.

Name(Required)