You feel that you should buy oil and gas stocks because the gas and oil prices, but are not sure which oil and gas companies? stocks you should buy because you are apprehensive about their performance.

What do you do?

You either abandon your plan to buy the oil and gas stocks or look for another profitable sector. But the same problem may crop up in the other sector as well. You may not be able to decide which company's stock you should buy in the next sector you choose.

Would you like give up stock trading altogether and be deprived of its benefits because you cannot be sure about which company's stock you should buy?

You do not have to do this if you invest in ETFs because they offer baskets of stocks and not just one or two stocks. If the value of one stock in a basket falls, the value of other stocks may rise balancing out the loss in one stock.

It is, therefore, much more advantageous to invest in whole basket of stocks in the ETFs, rather than trading in some of the securities in the ETFs directly.

How to find the suitable brokers for ETF trading?

Most brokerage firms that deal with stock trading are suitable for ETF trading as well. The stock broker treats both kinds of investments in the same manner because the ETFs also trade like stocks. It is a good idea to engage the same online stock broker for both kinds of investments as you can avail minimum transaction costs or commissions.

How do you find the list of ETFs?

Most good stock charting software packages include the ETF list and also the price charts for each of the listed ETFs. You can also check online services on the internet and study financial newspapers to find out the ETF lists.

Do you get dividends from investments in ETFs as you get in stocks?

As a general rule, ETFs also pay dividends. ETFs are basically comprised of stocks whose companies usually pay dividends on them. The schedule of dividend payment by ETFs are different. Some ETFs pay dividends when one of their company holdings pays, others pay quarterly or half yearly and still others pay according to various schedules.

How do you decide which ETFs you should buy?

You buy an ETF like you buy a stock. You select a stock, analyze it technically and buy it if you find it suitable according to your investment objectives.

In technical analysis you try to consider the action of the ETF share prices by studying their price trends, support and resistance levels, moving averages and numerous other techniques and price indicators to determine which ETF to invest in.

In another case, you subject the stock to fundamental analysis and buy or reject it accordingly. Fundamental analysis involves understanding the economic factors, financial performance of the company, balance sheets, auditors? reports, its competitive strengths and failures, growth potential, future plans and so on.

The third option is to check your stock by combining both the methods of technical and fundamental analysis and decide the price at which to buy the ETF.

You have to study a basket of stocks in an ETF and decide which to buy.

Another fundamental strategy is to switch in and out of different ETFs on rotational basis and stick to those that appear to be leading at a particular point of time.

You can also try the buy and hold strategy when you invest in an ETF. It would be like buying and holding a stock whose price may rise and fall according to the market trends. The prices of various stocks in an ETF may and may not fluctuate in the same ratio. While the prices of some stocks may fall, those of a few others may rise as well even in the bear market. Herein lies the advantage of investing in ETFs.

Tax benefits

Most ETFs have the same tax implications that are applicable to stock trading.