2

Are SPDR accounts good for beginner investors who are only interested in long term investments/retirement? They really seem like "Set it and Forget it" kind of funds, how wrong am I on that assumption? What are the pros and cons of such an attitude with SPDR accounts?

** SIDE NOTE: I would think SPDR would be a current tag, but I guess not. Does someone want to create and add it?

EDIT: Thank you DG99 for the correction, yes my question should be are SPDR ETFs good for beginners?

Brian H
  • 123
  • 5
  • 3
    Welcome to [Money.SE]. One good thing for a beginner would be to define one's terms precisely. What do you mean by a "SPDR account"? SPDR does not have private clients. Do you mean putting money in a brokerage account and then using some of that money to buy SPDR ETFs? Another good thing for a beginner would be research. This introduction to ETF providers, for example, does a good job explaining why we do not have a SPDR tag: there are far too many ETF providers to each deserve its own tag. – dg99 Jan 06 '15 at 16:04
  • I would also add some info about your current financial situation to get a better answer. What is your debt, income level, job status, housing status, and your immediate and longer term financial goals? – Pete B. Jan 06 '15 at 16:18
  • @dg99 So calling these funds ETF's is the proper term and not SPDR's?? As I understood it, a SPDR ETF is a fund that tracks an S&P index. I appreciate that insight, as stated still a beginner and this will help me get my bearings most definetly and express myself more clearly. – Brian H Jan 06 '15 at 16:25
  • @pete belford Well like I stated the interest in such a fund is for long term investing that I can place money into the fund and know it is already diversified and follows a particular index of interest for me. I am not sure how my debt, income or statuses have any relevance to understanding a SPDR ETF's nuances for a beginner, can you explain? For example, should I own a mansion or be homeless in order to decide if I want to purchase options in an ETF SPDR? I am awfully curious now to know as to why housing or job status has any relevance here. – Brian H Jan 06 '15 at 16:36
  • @BrianH if you had credit card debt I would recommend paying that off before investing. If you were saving for a home, then SPDR would not be a good place to invest. – Pete B. Jan 06 '15 at 16:38

1 Answers1

2

No, SPDR ETFs are not a good fit for a novice investor with a low level of financial literacy. In fact, there is no investment that is safe for an absolute beginner, not even a savings account. (An absolute beginner could easily overdraw his savings account, leading to fees and collections.)

I would say that an investment becomes a good fit for an investor as soon as said investor understands how the investment works. A savings account at a bank or credit union is fairly easy to understand and is therefore a suitable place to hold money after a few hours to a day of research. (Even after 0 hours of research, however, a savings account is still better than a sock drawer.)

Money market accounts (through a bank), certificates of deposit (through a bank), and money market mutual funds (through a mutual fund provider) are probably the next easiest thing to understand. This could take a few hours to a few weeks of research depending on the learner.

Equities, corporate bonds, and government bonds are another step up in complexity, and could take weeks or months of schooling to understand well enough to try. Equity or bond mutual funds -- or the ETF versions of those, which is what you asked about -- are another level after that.

Also important to understand along the way are the financial institutions and market infrastructure that exist to provide these products: banks, credit unions, public corporations, brokerages, stock exchanges, bond exchanges, mutual fund providers, ETF providers, etc.

dg99
  • 6,037
  • 26
  • 33
  • Thnk you, very concise and appropriate, for me at least. I would vote up, but not enough Rep at this time :) – Brian H Jan 07 '15 at 01:40