ETFs are the hottest investments right now. Do you know why ETFs have become so popular? The main reason for their popularity is that ETFs can be traded like stocks but have the diversification benefits of mutual funds. This makes ETFs highly attractive to the investing public.

Now ETFs are a basket of stocks constructed in such a manner that the stock basket return mimics a major stock index, a sector index or any market index. Suppose the ETF is mimicing the S&P 500 Index. If the S&P 500 Index goes up by 1%, the ETF will also go up by 1%. Similarly you can construct an ETF mimicing the Dow Jones Index.

This makes ETFs better than stocks as instead of owning only one stock, you have invested in a basket of stocks. This sounds like a mutual fund. Sure! But the ETFs have very low fees as compared to the various loads and management fees that you pay on the mutual funds.

Another big advantage that ETFs have on mutual funds is that you can trade ETF shares like stocks unlike the mutual funds whose Net Asset Value can only be calculated at the end of the day and you can only sell them at the end of the day not during the day.So ETFs are a much better investments as compared to both stocks and mutual funds.

Interestingly, you can also contruct ETFs known as Short ETFs or Inverse ETFs that mimic the inverse of an index. Suppose the S&P 500 Index goes up by 1%, the short ETF or inverse ETF will go down by 1%. You can even construct leveraged short ETFs. When the S&P 500 Index will go up by 1%, the leveraged short ETF will go down by 5%.

You must explore the world of ETFs. There are many exciting investment opportunities that are being offered by ETFs.