Complete Guide: How to Invest in ETFs and What Options to Consider in 2023

Why Do So Many Beginner Investors Choose ETFs

The reality is that not everyone wants to spend hours in front of screens analyzing charts or short-term positions. For those looking to build wealth without dedicating their lives to trading, ETFs represent a much more accessible alternative than traditional investments in stocks or cryptocurrencies. While a bank account barely offers noteworthy returns, historical ETFs have proven they can generate significantly higher gains through a passive and well-diversified strategy.

What Are ETFs Really and How Do They Operate?

Imagine you want to invest in the Fintech sector, but you’re not sure which companies to choose. A Fintech ETF solves this dilemma exactly: it’s a fund managed by specialists that pools capital from multiple investors and automatically distributes it among 20, 30, or more assets within the same sector or market.

Take the ARK Fintech Innovation ETF as an example. This fund concentrates its capital in around 30 leading companies in the Fintech ecosystem: Coinbase, Nvidia, Shopify, and Mercado Libre, among others. When you deposit $100 dollars into this ETF, your money is strategically spread among all of them simultaneously.

The best part is that you don’t need constant monitoring. If one of those 30 companies begins to underperform, the management team automatically replaces it with a more promising one. Your investment always remains in the companies with the greatest potential, optimizing your returns without you having to do anything at all.

Quick Comparison: Advantages vs. Limitations of ETFs

What you gain by investing in ETFs:

• Passive but professional management of your portfolio
• Historical returns higher than traditional bank products
• Automatic diversification effortlessly
• Ideal access for beginners in the investment world
• Lower risks compared to leverage, futures, or CFDs

Limitations you should know:

• Returns do not match what short-term swing trading or margin trading can generate
• Profitability depends directly on the quality of the fund manager
• Requires patience: the best results come in the long term

Main ETF Categories: Understanding Where You Invest Your Money

ETFs are fundamentally classified by two criteria:

According to the origin market: ETFs can focus on stocks, international currencies, commodities, or cryptocurrencies. Each presents different volatility and return potential. For example, a cryptocurrency ETF offers more aggressive gains but with proportionally higher risks; while a Forex currency ETF tends to be more stable but with more moderate returns.

According to sector specialization: Within the stock market, there is the greatest variety. You can find ETFs dedicated to specific sectors (technology, energy, transportation), specific exchanges (New York, Tokyo, Hong Kong), or broad indices like the S&P 500 or Nikkei 225.

Key Criteria for Choosing the ETF That Fits Your Profile

There is no “best universal ETF” because each investor has different goals and risk tolerances. However, these factors will help you make smarter decisions:

First: Define what type of market attracts you Do you prefer the relative stability of stocks and commodities, or are you interested in the explosive (and risky) potential of cryptocurrencies? Stocks and commodities usually respond better to fundamental analysis, placing them at an intermediate risk-return point.

Second: Analyze factors impacting each sector During the pandemic, all airline ETFs collapsed simultaneously because the global air transport shutdown affected the entire sector equally. At the same time, tech ETFs surged thanks to the boom in home electronics consumption. However, these same tech ETFs are exposed to disruptions in the microchip supply chain, which remains under-diversified.

Third: Consider geopolitics if targeting specific markets When Russia invaded Ukraine, ETFs focused on Russian companies plummeted within hours, anticipating economic sanctions. No technical chart can predict geopolitical conflicts, trade wars, or radical regulatory changes—they only reflect these events after they happen.

Fourth: Don’t ignore technical analysis Despite its limitations in predicting external events, charts are still extremely useful. Indicators like moving averages, oscillators, and support/resistance levels reveal the real behavior of large institutional funds and can guide you on when it’s prudent to enter or exit positions in specific ETFs.

Step-by-Step Process to Start Investing in ETFs

Registering and getting started is simpler than it seems:

(1) Create your investment account Access a reliable trading platform and select “Open a real account.” Provide your region and continue.

(2) Verify your email Enter your email and password. Confirm your account by clicking the link you receive in your inbox.

(3) Deposit funds Go to the capital loading section, select the amount you want to invest, and choose your payment method. With bank cards, funds are credited in seconds.

(4) Explore available ETFs Search the catalog for the funds that interest you. This is the perfect time to do external research: look for fundamental information about each ETF before investing.

(5) Execute your first investment Once you’ve identified your target ETFs, open buy positions by entering the desired amount and confirming. Your investment begins working automatically!

Recommended ETFs to Keep on Your Radar in 2023

Although your own analysis will always outperform any generic recommendation, these funds have recently attracted a lot of attention:

ARK Autonomous Tech & Robotics ETF (ARKQ) Focuses capital on companies specializing in automation, robotics, and artificial intelligence. Includes names like Iridium Communications, Trimble, and Nvidia. The explosive growth of AI solutions is driving this fund significantly upward.

Invesco Solar ETF (TAN) Invests in solar energy producers, panel manufacturers, and related technologies. SolarEdge, First Solar, and Enphase Energy are some of its largest components. Ideal for those betting on the global energy transition.

Vanguard Information Technology ETF (VGT) When eight of the ten largest companies in the world are tech firms, having exposure to the sector makes sense. This ETF groups Microsoft, Google, Amazon, and other tech giants into a single instrument.

Global X Fintech ETF An interesting alternative for those seeking Fintech exposure but with less exposure to the cryptocurrency market. It leans more toward traditional digital payment processors like PayPal and Square, as well as financial infrastructure companies like Visa and Mastercard.

Amplify Lithium & Battery Technology ETF Especially relevant in the era of electric vehicles. This fund invests in lithium extraction, lithium-ion battery production, and companies like Albemarle, Panasonic, and Tesla. Its performance is directly linked to the global adoption of EVs.

The Golden Rule: Diversification Is Your Best Protection

Investing all your capital in a single ETF is exactly the opposite of what you should do. Diversification is the only “free lunch” that exists in investments: it reduces your risk without sacrificing potential returns.

The optimal strategy involves spreading your capital across multiple ETFs from different sectors, potentially combined with individual stocks, commodities, or other assets. If technology falls, your exposure to renewable energies could partially compensate. If lithium crashes, your positions in Fintech could be at all-time highs.

The economic landscape is always changing. The pandemic showed that markets can turn dramatically within weeks. Those same swings that generate panic also create extraordinary opportunities for those properly positioned. Stay constantly aware of the global outlook and re-balance your portfolio strategically to capitalize on these trend changes.