5 Winning Strategies for ETF Trading

ETF Trading

In the ever-changing world of trading and ETF Trading, things have transformed quite eminently since the last decade.

There was a time when most people used to focus more on the traditional stock market than anything else. But, now, when you open social media, you see people discussing mostly the stock market, NFTs, cryptocurrency, and whatnot.

Following that, you see a shift in investment, with people interested in investing in the stock exchange rather than keeping them in the bank.

You might think, what is going on? But trust me! If you don’t know much about the stock market, especially the ETF, it is time to get your gears up and start researching.

But, before you opt for an extended study, let me offer you a fundamental idea of what it is.

What Is An Exchange Trade Fund?

Exchange-traded fund or ETF is synonymous with mutual funds, which means it is a type of pool investment security that operates like a mutual fund. ETFs can be sold or purchased like normal stocks in the stock market.

You can structure an ETF to track anything from the price of an individual commodity to a large collection of securities.

NOTE: They operate like mutual funds but can be exchanged or sold at the stock exchange. ETFs are more cost-effective than mutual funds. Further, they are marketable security which means they can be easily brought and sold. 

ETFs are a brilliant way for beginners to start trading, as it has multiple benefits ranging from –

  • Low expense ratios
  • Abundant liquidity
  • Range of investment
  • Diversification
  • Low investment threshold

Thus, in a way, it allows amateurs to learn about the process of investing in stock. If you want to learn more about them, visit Roboforex

Apart from that, investors must enter trading with a trading market to ensure enough profit when they leave the market.

Further, it ensures they don’t lose enough money during buying and selling stocks.

Here are a few ETF Trading Strategies-

ETF Strategies

Anyone wanting to enter the trading market wants to gain larger profit with minimal investment, as greater returns will allow them to invest more.

So, here are five winning ETF strategies to take you a step closer to being a billionaire –

1: Dollar-Cost Averaging

This is for the people who have entered their employment for a year or two and looking to invest in stock. Dollar-Cost Averaging is the best way of beginning the journey.

You have to invest a fixed amount of dollars in the asset. No matter the price of asset changes, the investment remains the same.

This way, you can earn more ETFs where the price is low and vice versa when the price is high. Yet, with a fixed investment, you can accumulate a large amount of ETFs and gain a handsome amount in return.

Further, it will still be the discipline of saving money in the young generation. 

Hence, young people can invest in ETFs rather than keeping their money at a low-interest rate in banks.

2: Asset Allocation

This is for the people planning for long-term investment, which means investing in assets that can later be diversified with the investment made on ETFs.

Asset Allocation is a strategy where you can allocate a portion of the asset into a category like stocks, bonds, mutual funds, and cash. It is a powerful strategy that you can take advantage of.

The low investment threshold of ETFs allows you to mix your earnings with your need.

For example, at the start of your employment, you invested solely in ETFs with long-term investment horizons and high-risk tolerance.

Later, as you start investing in making a family and looking to buy a house or car, you can allow a few percent of ETF assets into buying bonds.  

3: Seasonal Trends  

It is the best choice for beginners to start investing their money on a short-term basis. Like in social media, there is also a trend in trading, where you can invest as per your choice.

It will bring you high returns and give good value to your investment dollars.

For example, you can invest in gold from September to November, as it is the time when Indians all world enter the gold market for Diwali and wedding seasons.

So, when the market falls in mid-October, you purchase and sell them in the next festive season for good returns. 

The Bottom Line

Other strategies range from hedging to sector rotation, but these strategies can be tricky for beginners.

Consequently, in the end, the only things that matter are how much you want to invest, how much you can take, and how long you plan to invest. 

Hence, invest carefully.