When it comes to investing your money, it can be tricky to figure out which options are best for you.

For instance, while you’ve probably heard of acronyms like RRSP or TFSA, ETFs (aka Exchange Traded Funds) might not be as familiar.

Your millennial peers certainly know what we’re talking about, however. Among generations, millennials are putting the highest percent of their assets into ETFs. According to a Schwab study conducted last year, 61 percent of millennials planned to increase their investments in ETFs in 2016. As a result, these funds are being designed more often with young investors in mind.

This surge of interest begs the following question: why are ETFs so popular with millennials? Well, we’re going to break it down for you so that you have all the knowledge you need if you want to hop on the investment bandwagon.

 

What are ETFs exactly and why should we invest in them, anyway?

In basic terms, an ETF is an investment that represents a basket of stocks, bonds or other investments. Unlike traditional mutual funds, an ETF is traded on a stock exchange, and often tracks a market index. This means its value changes throughout the day as it’s bought and sold.

There are ETFs that focus on pretty much any market or exposure that you can imagine and you can trade them the exact same way you would stocks. However, since you’re not purchasing single stocks, your ETF can consist of many different investments in one simple package.

 

How does this benefit you, exactly?

Each ETF represents a basket of securities, typically in different sectors, providing you with diversification. Since you’re not putting all your money into one stock or bond, if one of the holdings in the basket underperforms, it could be balanced out by a more successful one.

Another big advantage of ETFs is their low cost. Because an ETF tracks an index, it requires fewer administrative costs to maintain than actively managed portfolios.

Considering these benefits, it makes sense that millennials are increasingly drawn to ETFs. It’s also why they are quickly growing in popularity with professional investors as well as individuals.

 

So how do you get started with ETF investing?                                                  

You can purchase ETFs through a licensed advisor or even manage your own investments (most banks have discount brokerage divisions where you can open a DIY account). But if you’re looking for a more ‘hands-free’ option, BMO Wealth Management/BMO Nesbitt Burns makes investing in ETFs easy with BMO SmartFolio. And you don’t need much investing knowledge to get started.

All you really need to do is fill out a profile questionnaire, decide on your investment objectives and they match you with one of five ETF model porftolios. Once you open your account, you can track your progress online, 24/7, via any device. Leave the rest for the experts (and spend more time doing your own job in the process). They will actively manage your online model ETF portfolio and rebalance it when necessary.

You don’t have to be sitting on a goldmine, either. With BMO SmartFolio, you can invest with as little as $5,000 and take advantage of an affordable way to have a professionally managed portfolio.

 

Low-stress, low-cost investing? Sounds like a no-brainer to us.

 

*Commissions, management fees and expenses all may be associated with ETF investments. Please read the prospectus before investing. ETFs are not guaranteed, their values change frequently and past performance may not be repeated.

BMO SmartFolio is a product of BMO Nesbitt Burns.

 

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