Which ETF Strategy is Right for You?

Finding an ETF strategy that works for your individual portfolio needs is very important. The ETF presents you with many unique investment opportunities. It is a very flexible type of investment and it truly does have something for everyone. With over 800 actively traded ETFs in the marketplace it is easy for you to find something in almost every area. Here are a few different ETF investment strategies that you could employ in your portfolio.

Diversification


The great thing about ETFs is that it is very easy to diversify your portfolio. ETFs are much like mutual funds in that they are made up of a great deal of other investments. They will usually hold stocks from many different companies within the ETF. Therefore, you can diversify your investments over an industry or wide collection of industries with an ETF. Diversification will allow you to whether the potential storms that you may face in the future with problems in certain industries.

Hedging


With an ETF investment strategy, you can hedge against the market going down. Through the use of an inverse ETF or leveraged inverse ETF, you can actually profit if the market takes a downturn. This will allow you to salvage some of your losses, or profit if you expect the market to go down. This is something that you can not do with a lot of other types of investments out there.

Commodity Investing


Through the use of an ETF, an investor can easily get involved with commodity investing. In the past, investing in commodities was very difficult for most people. For example, you had to get involved in the futures market and take out a confusing futures contract in order to benefit from commodity prices. If you wanted to speculate in the oil market, you had to learn how to trade futures. This scared off many investors and it made it confusing for others. With the ETF, you can just buy shares in an oil ETF. This allows you to benefit from increases in the price of oil without all of the confusion. You can also be a little more diversified than just strictly speculating on the price of oil.

Core Holding


Many investors are using ETFs as the core of their investment portfolios. Since ETFs are so flexible and cover such a vast array of options in the market, you can cover all of the bases with them. The major equity asset classes and the fixed-income market can be covered with a few ETFs. They are flexible enough that you can buy and sell them if you want. However, with their diversified nature, they make it ideal for you to use them as the core of your portfolio.

Deciding on a Strategy


Choosing an ETF investment strategy can seem a little confusing at first. However, if you do your research, you can find a strategy that works for you. These are some of the more popular strategies out there, but there are many more ways to invest with ETFs. Just make sure that the strategy you choose meets your portfolio goals. 

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