ETF's have grown
in popularity in recent years in
response to the opportunity to participate in an asset class or sector
move. Exchange traded funds represent a basket of stocks and provide
'broad' based exposure to a group of stocks instead of having exposure
to just one individual stock. There are a number of different create
ETF strategies that can be employed. Some common ETF strategy
approaches will be discussed further.
Sector Exposure
ETF lend themselves to a number of economic or sector based strategies.
As an inflation hedge or to counteract times of uncertainty, investors
can take positions in precious metals or gold based exchange traded
funds. The Market Vectors Gold Miners ETF, iShares COMEX Gold Trust and
Powershares DB Precious Metals are examples of available ETFS.
Ex
Fund Manager Reveals: "What you need to know to successfully trade
ETF'S".
Emerging Market
Exposure
The growth in India, China and Brazil in recent years has prompted some
astute investors to consider how to gain exposure to theses growing
economies. With the difficulties of dealing with overseas regulatory
requirements, gaining entry to the markets and facilitating foreign
exchange transactions, investors can buy ETF's which comprise a basket
of stocks traded on overseas markets. The iShares MSCI Brazil Index,
Wisdom Tree Emerging Market, First Trust ISE Chindia and Xinhau 25
Index are popular choices for foreign emerging market exposure.
Dividend Growth
The Wisdom Tree company creates many ETF based products that comprise
high yielding stocks in international markets and different sectors. As
an income and capital growth ETF investment strategy, you can purchase
a high yielding ETF in a sector you consider likely to encounter
favorable conditions. Examples include Wisdom tree International Top
100, Wisdom Tree Small Cap Dividend and Wisdom Tree International Large
Cap.
Pairs Trading
Sophisticated ETF strategies can employ market neutral or biased
positions that comprise long/short combinations of stocks and exchange
traded funds.
Hedging
Another ETF strategy is the use of ETF products as a hedge. These can
be used in combination with stock, futures or options positions.
Portfolio
Composition
Accumulating positions in ETF's can be employed as a long term ETF
strategy. Allocating money on a regular basis to purchase ETF's is
similar to a stock investment plan that pursues capital growth over
time.
Next article: ETF
Research
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