Found a little extra cash recently? If so you might want to take a look at buying some exchange traded funds (ETFs).

An ETF is an investment fund that is traded on stock exchanges, much like stocks. It comprises assets such as stocks, commodities or bonds and trades close to its net asset value over the course of the trading day.

Most ETFs track an index, such as a stock index or bond index and may be an attractive investment due to their low costs, tax efficiency, and stock-like features. One of the benefits of exchange traded funds is they are very flexible to meet a wide variety of investor needs.

An ETF includes features of a mutual fund, which can be bought or sold at the end of each trading day for its net asset value. Therefore an ETF is a type of fund in which a corporation or trust owns assets (bonds, stocks, gold bars, currencies) and divides ownership into shares that are held by shareholders.

Of course, to begin investing in ETFs you should seek the help of your financial advisor; together you can build an investment plan which may lead to a financially rewarding experience. Depending on how much money you have to invest and your experience, you may try investing on their own rather than add it to an advised portfolio. As you begin the journey of making your investment selections, you may realise there aren’t many useful tools online to help those of us who aren’t investing a large sum of money.

If you don’t work in this industry and have not been exposed to training, resources and information or any experience, it is very clear how overwhelming you may find it.

1. But fear not, choosing the right exchange traded fund is not that complicated. If you remain focused on a few key areas, you may find your investing experience to be much easier.

2. You need to understand your goals — are you investing for the long- or short-term? Do you need to build a core of wide-ranging investments or do you want specific exposures?

3. Get to know the fund provider — does the firm have a good reputation in the ETF business? How well does it know its markets and industries?

4. Be sure to examine total costs — look at the fund’s management fees, commissions, capital gains distributions and index tracking performance.

Simple steps to follow for a short journey are to start online and begin researching ETFs. After considering your investment objectives and time horizon, you may stick to the basic core funds that cover retirement and advised accounts, or venture outside of those.

You may go beyond the basics and think about other strategies to invest in. Funds which seek to provide exposure to specific market attributes that have historically driven risk and return may potentially provide greater returns, compared to traditional index benchmarks, such as the S&P 500.

Do a little research in ETFs and the financial markets. Smart beta, an investment approach that combines aspects of both active and passive investing, is a relatively new concept in the world of ETFs. You may want to seek a company that not only understands passive index investing, but is also backed with a research team to select the right stocks for the funds.

Check the price tag and examine the costs associated with the fund. It is important to not only look at the fund expenses, but also performance and trading commissions. You should be able to find expenses and performance costs of the fund you’re looking at on its website. Narrow the list of choices. Soon you will be able to narrow the selection to a few ETFs. Compare their stock holdings and also lists on the funds’ websites to create a diversified portfolio with minimised overlap.

I can empathise with investors who try to do this research on their own, but this does not have to be a solo journey. Seek a financial advisor and focus in on your goals, the investment company and the total costs, and you may find it easier to streamline the process into something manageable.

When investing there are no guarantees, so speak to your wealth manager or financial advisor and together you can discover how easy and rewarding it can be to invest in exchange traded funds.

Reece Ramdial is a research analyst at Stocks & Securities Ltd.