If you use exchange traded funds - ETF's - as an investment vehicle then what is the best technique to use to maximize returns? Fundamental analysis or technical analysis?
A fine way to minimize risk is to diversify funds. With a spread of investment your money is safer than
having "all your eggs in the one basket" so to speak. Mutual funds was the traditional investment vehicle
for spreading the risk but there are a number of drawbacks to mutual fund investment - the main one being
the lack of flexibility they provide.
Technical analysis on the other hand tries to identify trends and take advantage of them. This perhaps is the more practical method for most people to use with their ETF investment.
Take an example here to illustrate this further. Lets say that a hurricane is approaching the US and oil prices in the Gulf coast begin to rise in anticipation of this happening. The price is already moving when the knowledge of the hurricane became available and not when the hurricane hits.
Although ETF's are also pooled funds they are listed on the stock market and thus can be traded as you would any other stock. In other words if the value of your ETF goes up (or down) you can sell or buy within seconds - by either a quick call to your broker or managing your account online.
Ideally you want to have a system in place where you are regularly exposing a small proportion of your funds to the risk. If you can do your market analysis in a fairly short time each day, rather than spending hours on it and at the same time you have some accuracy from that analysis then you are ahead of the game.
So over all, exchange traded funds are a great way to invest capital. You have the security in diversifying your shares while at the same time having the flexibility of intra-day trading to maximize gains and minimize potential losses. Furthermore you can use put options to minimize risk further and other forms of options to add to investment flexibility further. Good luck with your trading! - 29950
A fine way to minimize risk is to diversify funds. With a spread of investment your money is safer than
having "all your eggs in the one basket" so to speak. Mutual funds was the traditional investment vehicle
for spreading the risk but there are a number of drawbacks to mutual fund investment - the main one being
the lack of flexibility they provide.
Technical analysis on the other hand tries to identify trends and take advantage of them. This perhaps is the more practical method for most people to use with their ETF investment.
Take an example here to illustrate this further. Lets say that a hurricane is approaching the US and oil prices in the Gulf coast begin to rise in anticipation of this happening. The price is already moving when the knowledge of the hurricane became available and not when the hurricane hits.
Although ETF's are also pooled funds they are listed on the stock market and thus can be traded as you would any other stock. In other words if the value of your ETF goes up (or down) you can sell or buy within seconds - by either a quick call to your broker or managing your account online.
Ideally you want to have a system in place where you are regularly exposing a small proportion of your funds to the risk. If you can do your market analysis in a fairly short time each day, rather than spending hours on it and at the same time you have some accuracy from that analysis then you are ahead of the game.
So over all, exchange traded funds are a great way to invest capital. You have the security in diversifying your shares while at the same time having the flexibility of intra-day trading to maximize gains and minimize potential losses. Furthermore you can use put options to minimize risk further and other forms of options to add to investment flexibility further. Good luck with your trading! - 29950
About the Author:
Learn more about etf fund. Stop by www.etftrading.co.uk where you can find out all about s&p 500 etf and what they can do for your investments.
