8 ETF Investing Strategies to Boost Your Portfolio


If you're looking for a passive investing approach or an active investing approach,8 investment recommendations for ETFs that offer a choice of strategies are in the blog.


Exchange-traded funds (ETFs) share the same characteristics as both mutual funds and individual stocks. Like mutual funds, they are made up of a number of different securities, but like individual stocks, they are traded on stock exchanges throughout the trading day. Whether you are looking for a passive investing approach or an active investing approach, these affordable and flexible investment tools offer a choice of strategies suitable for most investors.


8 ETF Investment Strategies


Smart investors keep their investment strategies up-to-date to improve returns and reduce risk. Here are some ETF investment strategies you might want to try in 2021 to refresh your portfolio and adapt to changing times:


1. Passive Strategy

Because ETFs have a basket of stocks, it's easy to put together a diversified portfolio, including a portfolio that reflects the entire world market, without any active management. You can choose from several ETFs that, when combined, cover the key asset allocation categories of small, medium and large equity, growth and value, international and emerging markets, and bonds. Or you can choose just two funds, such as the Vanguard Total World Stock ETF (VT) and the Vanguard Total Bond Market ETF (BND), which reflect the global stock market and the US bond market respectively, including all asset classes.


2. Dollar-Cost Average

Dollar cost averaging is a long-term strategy that can be used with any type of investment, including ETFs. The key is consistency. The premise is that by buying stocks, regardless of the current price, you deposit the same amount on the same date each week or month. When the price is lower, you get more shares for your money. When it is higher, you buy less shares. This is a strategy that will help you, over time, buy more when something is cheap and less when it is expensive, which is the whole point of investing in the first place.


3. Low Volatility Investment

Even if the market generally follows an upward trend, some investors cannot digest the daily ups and downs of the markets. Investments with low volatility tend not to have the same price fluctuations as the overall market. Some ETFs feature stocks specially selected to be low in volatility, such as the iShares Edge MSCI Min Vol USA (USMV) ETF, while other ETFs remain stable on both ups and downs using a hedging strategy to minimize volatility. uses trending stocks. markets.


4. Trading Strategies

Like stocks, ETFs can be traded throughout the day to beat market returns on major exchanges. Day trading involves high volume very fast trading in a single day. Swing traders, on the other hand, take a slightly longer position, from a few days to a week or more. Investors use technical analysis by looking at historical prices, trends and charts, or they may use fundamental analysis such as stock news or the use of economic and financial data to determine the true value of an investment. Always consider transaction costs when making short-term trades and understand the many associated risks before you dive in.


5. Sector Strategy

One of the great things about ETFs is their unique ability to invest in all sectors of the economy that show potential. The risk in an industry strategy is that some companies in the industry may outperform others. ETFs can help protect your bets by allowing you to invest in many companies in the same industry. For example, you might choose an ETF that only includes healthcare stocks or that only invests in financial services companies. Industry investors may short sell when they think a particular industry is about to decline.


6. Bond ETFs for Income Generation

Investors approaching retirement often look for a strategy that will generate income without taking too much risk. Bond ETFs can serve this purpose well. You can buy several ETFs, each containing different types of bonds, such as long- or short-term Treasury bonds, corporate bonds, or municipal bonds. Or you can choose a single ETF that includes all these bond types. Add a high-yielding stock dividend fund and you'll create a diversified portfolio of income-producing ETFs. Just stay away from the riskier, so-called junk bonds that have a high level of volatility.


7. Leveraged Trading Strategy

Leveraged and inverse ETFs offer the opportunity for enormous returns through financial derivatives and debt securities, but as with any speculative strategy, they can also inflict huge losses. For example, the ProShares Ultra Standard & Poor's 500 index ETF provides twice the daily returns of the S&P 500. That's great if the index goes up, but negative returns are also doubled, so a 1 percent drop in the index is a 2 percent slide for your investment. Combine that risk with the typically high management fees and commissions, and these volatile investments are not for the faint-hearted.


8. Robo-Advisor Strategy

This set-and-forget approach to investing works well for some investors. Robo-advisor is a program that manages your money based on computer algorithms modified according to your goals and risk tolerance. Most robo-advisors use a portfolio of a diversified pool of ETFs, reinvest your dividends, and rebalance your portfolio to match recommended rates. Fees are usually low as everything is automated. For example, Schwab Intelligent Portfolios charges no management fees but requires a minimum investment of $5,000. WiseBanyan's basic offering is free with a minimum investment requirement of just $1.


Whichever ETF investment strategy you choose, make sure you understand the risks as well as the fees or commissions you will pay. Not every ETF strategy is right for everyone - especially if you're interested in investing for beginners - so only use strategies you feel comfortable with. We hope that this blog post will be beneficial for you. We will continue to create useful works in order to get inspired by everyone. We are sure that we will achieve splendid things all together. Keep on following Finage for the best and more.  


You can get your Real-Time and Historical ETFs Data with Finage free Data API key.

Build with us today!

Start Free Trial