What Is an ETF? (Part 2: Learning with Examples)

By VeilNode -


A version even middle school students can understand

I believe financial education is most effective when it starts early.
At the same time, I’ve realized that many adults also have very little knowledge about investing and finance.

That’s why I wrote this article in a student-friendly format, hoping it might be helpful in some small way.
Even if it feels overly simple, I believe this stage is about building strong fundamentals.

I’m still learning myself, and when something feels wrong, I step back and rethink it.
So what should we teach our children about money and investing?

If you’re looking for a place to start, the Veilnodehub AI Digest & Financial Blog is a good option.
I am not a professional investor, but I have real investing experience—and I’m learning as I go too.
Opportunities like this to learn properly are rare.

So, shall we begin?
The ETF guide will be divided into two parts.

part 1. Here ⬇️

💰What is ETF?🔥

Before We Begin

⚠️ Important Notice for Children and Adults (Disclaimer)

This article is written for learning and understanding only.
It is not written to recommend investing or to tell anyone to copy what is written here.

  • ETFs and stocks can go up, but they can also go down.

  • Money that is lost may not come back.

  • Children should never make investment decisions without help from an adult.

If this article makes you curious:
✔ Talk with your parents or guardians first
✔ Ask questions and make sure you understand before moving on

Investing is not like a school test with correct answers.
It is a choice that comes with responsibility.

If you don’t understand something, not buying it is also a smart decision.
Waiting is a valid choice too.

This image shows SCHD, one of my favorite ETFs, increasing in price as displayed on a well-known fintech app in Korea.

Part 2. How Should We Choose and Approach an ETF?

(Using my personal experience with SCHD as an example)


4. If You Had to Choose Just One ETF: 3 Key Criteria

You don’t need to look at complicated indicators when starting out.
For beginners, remembering these three points is enough.

Criterion 1. The ETF should hold many companies

(Explained with the SCHD example)

The biggest advantage of ETFs is diversification.
Because an ETF holds dozens or even hundreds of companies in one basket,
the failure of a single company has a limited impact on the whole fund.

One ETF that clearly shows this strength is SCHD.

SCHD is made up of about 100 large U.S. dividend-paying companies.
It is designed to avoid excessive concentration in a single company or sector.

Of course, there are many ETFs with similar but slightly different characteristics—
such as JEPI, JEPQ, VOO, and SPYI.
While all of these are investable products, SCHD stood out to me for specific reasons.

Why I Chose SCHD

To be honest, I wasn’t confident from the beginning.
When the AI sector was experiencing heavy volatility,
a highly experienced Korean investor quietly said this:

“This is when you start looking at something like SCHD again.”

At the time, I was unsure.
SCHD didn’t have a flashy growth story,
and it wasn’t the kind of ETF that could multiply in value quickly.

But as the market became more unstable,
I began to realize how important a “hard-to-break structure” really is.
That realization led me to SCHD.

My Experience After Investing (Important)

So far, I haven’t regretted investing in SCHD even once.

  • The income is not large, but it is steady.

  • If you expect dramatic results from dividends alone, you may be disappointed.
    However, the realized total return has been quite solid.

  • The price level is reasonable, making it approachable for beginners.
    I personally recommend buying slowly over time rather than all at once.
    Even though SCHD doesn’t swing wildly, it still has small up-and-down cycles.

  • During unstable markets, it provides psychological stability.

  • In downturns, it offers a clear reason to hold on.

Honestly, ETFs that quietly produce consistent income like this are rare.
That’s why SCHD feels like a unique product to me.

A Very Important Condition

This must be stated clearly.

SCHD is not an ETF you should buy at any price or at any time.

  • You must consider overall market conditions.

  • You should avoid buying when prices are excessively high.

  • Caution is always necessary.

No matter how good an ETF is,
buying it at an expensive price can still lead to poor results.

The real strength of SCHD is not that
“you can hold it without thinking,”
but that “you can hold it long-term if you understand its structure.”

Summary of Criterion 1

This criterion is not just about the number of holdings.

  • A structure that includes dozens or hundreds of companies

  • Limited risk from any single company

  • Diversification that becomes more valuable when markets are unstable

ETFs that meet these conditions are the best starting point for beginners.

Criterion 2. The ETF should have a long history

  • At least 10 years of operation

  • Proven survival through multiple crises
    (financial crises, interest rate spikes, recessions)

Criterion 3. The structure must be understandable

  • You should be able to explain in words why it goes up or down

  • If you don’t understand how it works, it’s better not to buy it

In my case, SCHD included companies like Lockheed Martin,
along with healthcare and energy sector exposure,
which aligned well with my expectations.


 

This screenshot shows how the Toss app, a popular fintech platform in Korea, displays SCHD’s holdings and their percentage weights.



👉 Simple Formula

“Broad + Long-lasting + Understandable”

5. A 1-Year Roadmap for ETF Beginners

ETFs are not products for quick wins.

  • Months 1–3: Learn the basics, start with a small amount

  • Months 4–6: Buy consistently on a fixed schedule

  • Months 7–9: Become less emotional about market swings

  • Months 10–12: Investing habits begin to form

After about one year, most people truly understand what ETFs are.

6. Common Traits of People Who Don’t Fail with ETFs

People who avoid failure with ETFs tend to share these traits:

  • They are quiet (they don’t brag)

  • They are slow (they don’t chase big wins)

  • They follow rules (they don’t act on emotion)

  • They keep it simple (they don’t overcomplicate)

With ETFs,
the winner is not the smartest person—but the one who lasts the longest.

⚠️ One Last Thing You Must Remember

ETFs are relatively lower-risk,
but there is no such thing as a risk-free investment.

  • Prices can always move up or down

  • Losses are possible

  • You are responsible for your own investment decisions

Never invest based only on trends, recommendations, or other people’s opinions.
Only make choices you understand and can emotionally and financially handle.

Final Summary

  • An ETF is a basket that holds many stocks

  • It provides more diversification than individual stocks

  • Beginners should start with broad, long-established ETFs

  • All investing involves risk, and responsibility always belongs to the investor

If you understand this much,
you’ve built a solid foundation in ETF basics.

You get to experience the magic of earning a small profit, even with a very small amount of pocket money.



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