Exchange Traded Funds (ETFs) Offer Flexible Investment Approaches
Exchange Traded Funds (ETFs) offer low expense ratios and high trading flexibility. That makes them attractive alternatives to traditional mutual funds. And they can serve as part of both long-term and short-term investment strategy. Here's the scoop...
ETFs trade intraday just like a stock - unlike mutual funds. You can buy them long or sell short; use them in hedge strategies, and buy them on margin. If you can think of a strategy that can be implemented with a stock or bond, that strategy can be applied with an ETF - but instead of trading the stock or bond issued by a single company, you're trading an entire market or market segment. That's what makes them flexible.
*ETF Costs:
Though ETF fees may be less than most mutual funds, some are higher. So check their fees before you buy. Use the NASD Mutual Fund Analyzer to compare the expenses of up to three exchange traded funds, mutual funds or share classes of the same mutual fund.
Be careful not to offset any ETF fee advantages by accumulating commissions and other trading costs if you trade them frequently. Trading imposes commissions. But infrequent or high volume trading can help keep commission costs at a minimum.
*Using ETF index funds as an investment strategy:
You can choose ETFs that invest in broad-market indexes. There are ETFs that mirror the S&P 500, the Nasdaq 100, the Dow Industrials and about every other major market index - on the equity side. While on the fixed-income side, other ETFs track long-term and short-term bond indexes including the Lehman 1-to-3 Year Treasury, the Lehman 20-Year Treasury and the Lehman Aggregate Bond Index. Owning only two or three ETFs, you can create a broad and diverse portfolio that covers most of equity market and much of the fixed-income market. Then just stick to a buy-and-hold strategy as you would with any other index product.
*Actively Managing ETFs:
With ETFs you can create a broadly diversified portfolio but choose to actively manage it instead of just buying and holding a major ETF indexes as is done in passive management.
Apart from broad market index-based ETFs, you can buy ETFs targeted at a wide array of small-cap, sector, commodity, international, emerging market, and other investing opportunities. ETFs track indexes in just about every area, including biotechnology, healthcare, REITs, gold, Japan, and more.
You might add one or more of these targeted ETFs to your broad market ETFs as an aggressive addition to a conservative portfolio. Then, you can buy and hold it to create a long-term portfolio or trade more actively. As an example, if biotechnology is set to fall and while gold should rise, trade out of your biotech position and into gold in a matter of moments at any time during the trading day.
ETF offer a range of investment strategies and flexibility that's unique to them. Perhaps they offer an approach to investing you're looking for.
Shane Flait helps you with your financial legal, tax, and retirement goals.
Get his FREE report on Managing Your Retirement => http://www.easyretirementknowhow.com/FreeReportandSignUp.htm.
Read his ebook: 'Wise Way to Financial Independence' => http://www.easyretirementknowhow.com/WiseWayGate.htm.
ETFs trade intraday just like a stock - unlike mutual funds. You can buy them long or sell short; use them in hedge strategies, and buy them on margin. If you can think of a strategy that can be implemented with a stock or bond, that strategy can be applied with an ETF - but instead of trading the stock or bond issued by a single company, you're trading an entire market or market segment. That's what makes them flexible.
*ETF Costs:
Though ETF fees may be less than most mutual funds, some are higher. So check their fees before you buy. Use the NASD Mutual Fund Analyzer to compare the expenses of up to three exchange traded funds, mutual funds or share classes of the same mutual fund.
Be careful not to offset any ETF fee advantages by accumulating commissions and other trading costs if you trade them frequently. Trading imposes commissions. But infrequent or high volume trading can help keep commission costs at a minimum.
*Using ETF index funds as an investment strategy:
You can choose ETFs that invest in broad-market indexes. There are ETFs that mirror the S&P 500, the Nasdaq 100, the Dow Industrials and about every other major market index - on the equity side. While on the fixed-income side, other ETFs track long-term and short-term bond indexes including the Lehman 1-to-3 Year Treasury, the Lehman 20-Year Treasury and the Lehman Aggregate Bond Index. Owning only two or three ETFs, you can create a broad and diverse portfolio that covers most of equity market and much of the fixed-income market. Then just stick to a buy-and-hold strategy as you would with any other index product.
*Actively Managing ETFs:
With ETFs you can create a broadly diversified portfolio but choose to actively manage it instead of just buying and holding a major ETF indexes as is done in passive management.
Apart from broad market index-based ETFs, you can buy ETFs targeted at a wide array of small-cap, sector, commodity, international, emerging market, and other investing opportunities. ETFs track indexes in just about every area, including biotechnology, healthcare, REITs, gold, Japan, and more.
You might add one or more of these targeted ETFs to your broad market ETFs as an aggressive addition to a conservative portfolio. Then, you can buy and hold it to create a long-term portfolio or trade more actively. As an example, if biotechnology is set to fall and while gold should rise, trade out of your biotech position and into gold in a matter of moments at any time during the trading day.
ETF offer a range of investment strategies and flexibility that's unique to them. Perhaps they offer an approach to investing you're looking for.
Shane Flait helps you with your financial legal, tax, and retirement goals.
Get his FREE report on Managing Your Retirement => http://www.easyretirementknowhow.com/FreeReportandSignUp.htm.
Read his ebook: 'Wise Way to Financial Independence' => http://www.easyretirementknowhow.com/WiseWayGate.htm.
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