If you are new to the financial marketplace, you may well find yourself overwhelmed by the sheer range of products and derivatives available in 2016. It is therefore important that you compare these options in careful detail before making a decision, using acquired knowledge and understanding to refine your portfolio.
It is also important to learn about each individual option in detail, as this enables you to get the most from your investment and optimise returns. This is especially true with complex and diverse options such as ETF Trading, which can be traded differently according to specific strategies and underlying goals.
3 ETF Strategies that are suitable for beginners
ETFs can also be traded in a variety of methods that are suitable for beginners, making them extremely popular in the modern age. With this in mind, here are three EFT strategies that can be used by beginners to access low expense ratios, flexibility and most crucially high levels of liquidity:
1. Pound or Dollar cost averaging
This is the most basic ETF trading strategy, and one which is known to deliver reliable returns over a sustained period of time. Pound or dollar cost averaging is essentially a technique through which fixed currency amounts of a particular asset are purchased on a regular basis, and its rigid nature creates a risk-averse scenario where inexperienced traders can profit. The terms of your investment remain the same even as the value of the asset in question fluctuates, enabling you to capitalise on a liquid market while also negating volatility.
2. Asset Allocation
Asset allocation is a slightly more complex and powerful investment vehicle which benefits from relatively low minimum thresholds. It requires traders to allocate a portion of their portfolio to alternative asset categories, including bonds, commodities and stocks. Investors can implement as asset allocation strategy for as little as $50 per month, making it ideal for newcomers who are looking to take their first steps in the financial marketplace. The range of available assets is also diverse, making it easy for investors to adapt their portfolios as they gain additional experience.
3. Swing Trading
If you have knowledge of a specific market or industry but are new to ETF trades, you may well benefit from swing trading. These trades enable investors to capitalise on sizable swings in specific financial markets, alongside individual instruments and derivatives such as currencies and commodities. The relatively volatile nature of swing trading can certainly be negated by knowledge and patience, especially as it may take days or even weeks to achieve a return.