3 Best ETF Investment Tricks for Beginners

3 Best ETF Investment Tricks for Beginners

Venturing into an investment, you must be aware of the thumb rule of the market, which is to have an investment portfolio with diversified investment vessels.

3 Best ETF Investment Tricks for Beginners
3 Best ETF Investment Tricks for Beginners

Diversification of an investment portfolio means that you must be having different types of investment vessels that should be bought with your investment capital. Diversification of the portfolio not only gives returns from different places at once but also distributes the risk to various sectors and keeps it low. A diversified portfolio though requires significant capital to buy different kinds of investment products like varied stocks. Diversification is necessary in order to have the assurance that if you get unlucky. You won’t be failing on all sides and will still have returns from other investments that you have made.

Young investors who have recently started in the market generally have a tough time saving a meaningful amount to invest in different sectors. Recent work experience and beginner’s salary only liberates you to have small savings from the salary every month. And putting it into a savings bank account to have meagre interests added onto it.

When beginning to invest, young investors must be looking for options that will give them both lower risks and diversification. Such investment vessels in the market are Exchange Traded Funds or ETFs. ETFs are a good start for beginning your investment plans and also has better policies to help beginners understand the market with experience. You must know what the right steps and game moves to help you get the best out of your ETFs are.

Dollar-Cost Averaging

For beginning into ETFs as a beginner, the most basic trading strategy is dollar-cost averaging. In dollar-cost averaging, the investor is supposed to buy into a fixed-dollar amount of assets on a regular basis without considering the changing cost of the asset. Beginning investors are mostly young people who have had work experience of a year or two at most. Such employees must depend on their stability of income and save a few dollars from it. Instead of depositing these small amounts in a low-interest savings bank account, it can be used to regularly to invest in ETFs.

This kind of investment plan instils a higher level of discipline in the saving process. It increases the strength of your financial planning and lets you have a regular savings routine for investments other than ETFs. With the basic technique of dollar-cost averaging, which is regular payments in ETFs, you will amass a higher number of assets when the price of ETFs are low and fewer when the costs are higher. This will average the costs of your holdings and will have a handsome effect on the net worth of your assets.

Asset Allocation

Asset allocation is a powerful investment tool used by a lot of investors. Indeed, asset allocation refers to the balancing of risks and profits by allocating portions of the portfolio to varying asset classes like stocks, bonds or commodities to diversify the ETF investments. It gets more accessible for the new investors to have the benefit of diversification while investing through the low investment cap, which is generally about SGD 50.

Using this investment cap, newbies can efficiently allocate their investments in different ETF assets at a time, providing the much-required diversification seeing the holding time and the risk appetite of the investor. For example, a person at the age of twenty will invest most of their capital in equity ETFs considering their long term investment plan. But as they grow older, the investment plan gets complex by allocating the money in different ETFs to sponsor their major life decisions such as buying a house or a car.

Swing Trading

Swing trading is a different form of traditional trading that takes advantage of gains from an instrument of investment over a short period of its fluctuation. The time frame of swing trading can be from a few days to weeks. Swing trading might not be a gold standard in many of the investment products. But ETFs have the features that are suitable for swing trading. ETFs are available in different investment classes and a wide range of sectors. This makes them even more comfortable as the investor can choose to have his capital employed in the asset class that they have expertise in or even relevant knowledge.

Someone who has a speciality in technology can smoothly go forth and look for swing trades in the technology ETFs. People who want to invest in commodities like gold can direct their investments on a gold ETF such as the SPDR Gold Shares ETF. The reason why swing trading will provide results is that ETFs are an umbrella with different assets under its shade. So unlike single stocks, the downfall ‘won’t be affecting much on an ETF. Which means that your capital would not vanish into the market at once.

Sector Rotation

Some industry sectors on the market profit morethan average in specific time periods in the economic cycles. The trade plans set upaccording to these time periods provide a beneficial future viewpoint on yourinvestments. Sector rotation stands for the change of theindustry in which you are investing in order to beat the market odds. Forexample, if you’re investing in an ETF concerning commodities like gold. Theeconomic cycle sees stability, while gold is on the rise. At this point, thereis another industry that is seeing a surge during the economic cycle, takeconsumer staples, for example. Here is when you sell the assets in thecommodity sector and invest the capital with profit in the consumer staplessection. Doing this in two economic cycles increases the capital, and you getto decide in a while about the amount you can use in other sectors.

ETFs are a safe and profit positive sector for investors that are new to the investment sector. You should, however, be aware of the trading values that are not for beginners. These strategies may increase the ratio of profit to your investment. But also increases the risk factor and might make you lose some of your money.

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