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How to buy a wide variety of stocks without much effort?

· 3 min read

Last week, the three major U.S. stock indexes all rose by more than 6%, and technology stocks rebounded significantly.

The S&P500 and Nasdaq broke a seven-week losing streak, and the Dow stopped an eight-week losing streak.

When the stock market price bottoms out, how can investors profit from the trend with less risk and minimized time spent? Investing in index ETFs is probably an easy and effective way.

Q1: What are index ETFs?

Similar to stocks, investors can freely buy and sell shares of the index ETF on stock exchanges.

The difference is that a regular stock tracks a specific company, like Apple, while an index ETF tracks a market index that is made up of stocks and bonds, like the S&P 500.

Q2: What are S&P 500, NASDAQ and Dow Jones Indexes?

With hundreds and thousands of companies listed on the stock exchange, how do people identify the general performance of a market? Index is the answer.

Usually, an index is generated by taking a weighted average price of, let's say, 100 representative stocks. A higher index usually represents a higher market cap. Among them, the S&P 500, Nasdaq, and Dow Jones are the three most popular U.S. stock indexes that track large-cap U.S. stocks.

NASDAQ 100: An index tracking 100 stocks in the U.S. new technology sector. Also known as the U.S. Tech Index.

Dow Jones Industrial Average: An index that tracks the stocks of 30 prominent U.S. industrial companies.

S&P 500: An index that tracks the 500 largest companies in the United States. Different from Dow Jones, the S&P 500 is more encompassing, thereby able to reflect broader market changes.

Q3: What is QQQ and When to Buy it?

\ QQQ is a 1x ETF that tracks NASDAQ 100, which means it could yield 1x that of NASDAQ100. For example, if Nasdaq 100 returns 1% on a market day, QQQ would return 1% that day.

In a bear market, tech stocks tend to fall sharply due to the burst of high valuation bubbles. But they tend to return a notable gain when stock exchanges bounce back. Since the NASDAQ 100 primarily tracks companies in the tech sector, QQQ tends to deliver solid gains in stock-market rallies.

Q4: What is SPY and When to Buy it?

SPY is a 1x ETF that tracks S&P 500. Ideally it could earn 1x of S&P 500. Compared to Nasdaq and Dow Jones, S&P 500 is more representative of broader market changes. That being said, you could earn from SPY if the overall market is bearish.

Q5: What is DIA and When to Buy it?

DIA is a 1x ETF that tracks Dow Jones Industrial Average. Similarly, it could yield 1x of the Dow Jones Industrial Average. If Dow Jones Industrial Average returned 1% today, DIA would return 1%.

When stock markets have rallied, big-cap stocks tend to generate larger gains than small companies. Since the Dow Jones mainly focuses on large companies, investing in DIA during a market rally is believed to bring you good returns.