7 Reasons ETFs Have A Place In Your Portfolio
The acceptance of exchange traded funds (ETF's) expands each year. There are at least 1, 000 ETFs available to trade covering almost any asset class imaginable. Some of the largest ETFs are offered by ProShares, IShares, and the SPDRs.
7 Reasons ETFs Have A Place In Your Portfolio
There are numerous reasons for their increased popularity. The biggest attraction may be that ETFs are believed to be less risky than individual equities. Because ETFs are a collection of underlying securities the business risk of single stock exposure is reduced. There's no chance of corporate malfeasance affecting an ETF like it would an individual stock.
Other attractions to ETF investing are:
• The market can be traded on both the long and short side. This expands the chance for profits because an investor can gain from a rising or a declining market.
• Some ETF's are leveraged. More aggressive traders like the concept of increased leverage. There are now ETF's with not just double the added leverage, but also triple.
• The capability to trade multiple markets is possible. Oil, gold, silver are some of the possible commodity ETFs. World markets are accessible, too - country specific investments like: Brazil, China, Japan, etc.
• The currency market has many ETFs -- there is apt to be an ETF for all major world currencies.
• Option trading -- just as with stocks the same option techniques can be applied to ETFs.
• Portfolio diversification is simple given the number of asset classes, sectors, countries, and currencies represented by exchange traded funds.
• ETFs are not only favorites with the investing public, but also with hedge fund managers and day traders. One of the reasons, besides being great trading vehicles, is that they are useful as hedging vehicles.. Hedging with ETFs can safeguard the profits in a portfolio and it can be accomplished inexpensively.
As with single stocks, technical analysis techniques are suitable to ETFs. It's possible to apply trend following indicators and oscillators. Charting the price movement is no different than graphing a stock. The big index ETFs move very smoothly and are great vehicles to trade. An active investor could make a good living trading only index ETFs.
One caveat - note the volume on each individual exchange traded fund. Many like the SPY, QQQQ, DUG, and DIG have plenty of volume. Some of the more obscure, like some sector ETFs are thinly traded and should be avoided.
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Article Source: ArticlesBase.com
