How to Determine Your ETF Investing Strategy

Here I will give you the details on how to determine your ETF investment strategy. ETFs are short for exchange-traded funds, which are baskets of securities that you can buy or sell through a brokerage firm on a stock exchange.

How to Determine Your ETF Investment Strategy

ETFs are solutions for new investors with benefits such as low expense ratio, high liquidity, range of investment choices, diversification, low investment margins and many other benefits.

Types of ETFs

There are many types of ETFs, but we’re just going to look at some of them:

  • Equity ETF: This is a track of an index of equities. Some examples of ETFs are international ETFs, sector ETFs, dividend ETFs, and market-cap index ETFs.
  • Bond/Fixed Income ETFs: There are different types of bonds or fixed income ETFs but they fall into four distinct categories which are: sovereign, corporate, municipal and broad market.
  • Commodity ETFs: The four different types of commodity ETFs are equity ETFs, exchange-traded notes, physically backed funds, and futures-based funds.
  • Currency ETFs: There are different types of currency ETFs, but we are going to list some of them, which are: Invesco Currency Share Euro Currency Trust (FXE), Invesco DB US Dollar Index Bullish Fund (UUP), Invesco Currency Share Swiss Franc Trust (FXF ), and many others.
  • Specialty ETFs: There are two types of specialty ETFs which are leveraged funds and inverse funds.

Best ETF Trading Strategies

Below are the best ETF trading strategies for those with little experience with ETFs (Exchange-Traded Funds).

Dollar-average average

It is a method of investing the same amount of money in a target security at regular intervals over a specified period of time. Dollar-cost averaging is the practice of investing a fixed and agreed price or amount. This is a method that helps in developing a disciplined investment habit.

The benefits of dollar averaging are as follows:

  • This is risk reduction.
  • It is low cost.
  • You get out of a market slump.
  • It helps discipline your saving habits.
  • It helps prevent bad times.
  • It helps manage emotional investment.

You know that with every advantage there is a disadvantage, and the disadvantage of spending dollars is missing out on higher returns in the long run and not addressing investment risk.

Swing trading

Swing trades are trades that take advantage of swings in instruments such as stocks or currencies or commodities. It refers to medium term trading strategy which is used for forex trading. The goal of a swing trade is to be able to capture a large number of potential price movements.

Advantages of swing trading are as follows:

  • It takes less time to be able to trade.
  • It helps manage potential short-term profits by holding onto huge market swings.

The disadvantage of a swing trade is that the trade position is limited to overnight and weekend market risk.

Sector rotation

According to Investopedia, sector rotation is the movement of money invested in stocks from one industry to another as investors and traders anticipate the next phase of the economic cycle. However, according to Wikipedia sector rotation is a theory of stock market trading patterns.

Sector rotation is all about investing, well it is a method of investing which determines whether to shift funds from one stock market sector to another stock market sector.

The advantage of sector rotation is that it enables investors to profit or gain from an unpredictable financial environment, and not simply to gain higher returns. The disadvantage of sector rotation is that not all sectors perform well at the same time.


A hedge is a way to protect yourself from financial loss or other situations. To be able to use start-up ETFs as a beginner you need to protect yourself from annoying risks that can affect your financial start-up.

Hedging is the strategy that helps to limit or reduce the risk of financial assets. To mitigate risk it uses financial instruments or market strategies that hedge the risk of any future inflation. This approach or strategy helps to cancel out future losses or gains that may or may be incurred by an investment.

The advantage of hedging is that it helps or helps traders to survive during tough market times, another advantage of hedging is that it helps traders to be able to fight against interest rate changes, inflation and currency exchange rate changes. Disadvantages of hedging are that the cost of hedging can reduce profits, it is difficult to understand and it is not for all traders, it is usually big for short term traders.


What is a good ETF strategy?

There are some good options you can consider for ETF strategies, which are: dollar-cost averaging, asset allocation, swing trading, sector rotation, short selling, seasonal trends and hedging.

What does Warren Buffett think about ETFs?

Warren Buffett thinks S&P 500 ETFs are highly recommended. This type of investment is safe, requires little effort, and can add up to hundreds of thousands of dollars over time. And the more or the sooner you invest the more you will earn or the faster you will earn.

What is a good ETF portfolio?

Below is a list of good ETF portfolios:

  • iShares Core S&P 500 ETF (ticker: IVV).
  • Vanguard Growth ETF (VUG).
  • Vanguard Value ETF (VTV).
  • Schwab US Small-cap ETF (SCHA).
  • Vanguard Total International Stock ETF (VXUS).
  • Vanguard Total World Stock ETF (VT)
  • iShares Core US Aggregate Bond ETF (AGG).

How much should a beginner invest in ETFs?

There are fewer barriers to investing in ETFs. It doesn’t take much to build or create a balanced portfolio. This means you can put $500 in a stock ETF and you can invest $500 in a bond ETF to achieve a diversified two-asset-class portfolio that will give you a great start to a portfolio that suits your goals.

Is it advisable to buy ETFs when the market is low?

It is advisable not to stop investing. Most people have the mindset that investing in stocks when the market is down is a very bad choice. But it is not true, stock market downturn is the ideal time to invest. This is mainly because you can get lower price points while investing.

More related content

Leave a Comment

Your email address will not be published. Required fields are marked *