How to Determine Your ETF Investing Strategy

Here I would be giving you details on How to Determine Your ETF Investing Strategy. ETF is the abbreviation for the exchange-traded fund which is the basket of securities you could buy or sell through a brokerage firm on a stock exchange.

How to Determine Your ETF Investing Strategy

ETFs are the solution for beginner investors that is of benefit, benefits like low expense rate, abundant liquidity, range of investment choices, diversification, low investment threshold, and many other benefits.

Types of ETF

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

  • Equity ETFs: 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 bond or fixed income ETFs but they fall into four different categories which are: sovereign, corporate, municipal, and the broad market.
  • Commodity ETFs: The four different types of commodity ETFs are equity ETFs, exchange-traded notes, physically backed funds, and future-based funds.
  • Currency ETFs: There are different types of currency ETFs, but we are going to list out some of them, which are: Invesco currency shares Euro currency Trust (FXE), Invesco DB US Dollar Index Bullish Fund (UUP), Invesco Currency shares 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 Strategy

This is below are the best ETF trading strategies for those who have low experience with ETF (exchange-traded fund).

Dollar-Cost Averaging

This is the method of investing the same amount of money in target security at regular intervals over a period of some time the price. Dollar-cost averaging is the practice of investing a determined and agreed price or amount. This is the method that helps to develop a disciplined investing habit.

The advantages of Dollar cost averaging are as follow:

  • This is a reduction of risk.
  • It is of lower cost.
  • You ride out market downturns.
  • It helps discipline your saving habit.
  • It helps to prevent bad timing.
  • It helps to manage emotional investing.

You know that whatever has an advantage also has a disadvantage and the disadvantage of dollar cost is missing out on higher returns over the long term and also not having the solution to investing risk.

Swing Trading

Swing trades are those trades that take advantage of sways in stock or sway in instruments like currencies or commodities. This refers to the medium-term trading strategy that is used for forex trading. The goal of a swing trade is to be able to capture a huge amount of potential price moves.

The advantages of Swing Trading are as follows:

  • It takes a lesser time to be able to trade.
  • It helps to manage potential short-term profit by holding a huge amount of market swings.

The disadvantage of a swing trade is that the trade positions are 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 stage of the economic cycle. While According to Wikipedia sector rotation is a theory of stock market trading patterns.

Sector Rotation is all about investment, well this is a method of investment that determines whether funds would be transferred from one stock market sector to another.

The advantage of sector rotation is that it enables the investors to benefit or profit from an unpredictable financial environment, and not just that to be able to receive higher gains. The disadvantage of sector rotation is that all sectors do not perform well at the same time.


Hedge means a means of protecting oneself from financial loss or other circumstances. To be able to use the start-up ETF as a beginner then you have to protect yourself from disturbing risks that might affect your financial start-up.

Hedging is the strategy that helps to limit or reduce risk in financial assets. In order to reduce risk it uses financial instruments or market strategies that take off the risk of any future inflation. This method or strategy helps to cancel the future losses or gains that may happen or occur by an investment.

The advantage of hedging is that it facilitates or helps traders to be able to survive through tough market periods, another benefit of hedging is that it helps traders to be able to fight against interest rate change, inflation, and currency exchange rate changes. The disadvantage of hedging is the cost of hedging can reduce profits, it is difficult to understand and it is not for all traders, it is usually major for the short-term trader.


What is a Good ETF Strategy?

There is a good options you could consider for ETF strategy, which is: dollar-cost averaging, asset allocation, swing trading, sector rotation, short selling, seasonal trends, and hedging.

What does Warren Buffet think of ETFs?

Warren Buffet thinks that S&P 500 ETFs should be highly recommended. These forms of investment are safer, require less effort, and can accumulate hundreds of thousands of dollars over time. And the more or sooner you invest the more you earn or faster you earn.

What is a good ETF Portfolio?

There are lists of good ETF portfolios are listed below:

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

How much Should a Beginner Invest in ETF?

ETFs have a low obstacle to investing. It does not take much to make up or create a balanced portfolio. This means you can put $500 in a stock ETF and you could invest $500 in a bond ETF to be able to achieve a different two-asset-class portfolio that would be a great start to give a portfolio suitable for your goals.

Is it Advisable to Buy ETF when the Market is Down?

It is advisable to not stop investing. Most individuals have the mindset that investing in stocks when the market is down is a very poor choice. But that is not the truth, the stock market downturn is the ideal time to invest. This is major because you could get lower price points when you invest.

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