Exchange-traded funds (ETFs) have a lot of buzz surrounding them. They provide great investment options for an investor, but it’s important to know exactly what your financial goals are, the level of risk you’re willing to take and increase your financial knowledge so you know how ETFs work and what to expect. If you’ve considered incorporating ETFs into your portfolio before, here are some reasons why you should take the next step.
International Market Exposure
Foreign ETFs can help you add international exposure to your portfolio. However, not all companies are part of their country’s index ETF, so you may not have access to the smaller or mid-size companies. Other options you have as an investor to boost your international market exposure include foreign currency ETFs, international bond ETFs, some ETFs that focus on specific markets or some commodity ETFs that are connected to specific global markets.
Earn Short-Term Returns With Extra Cash Flow
If an investor has a period where they experience extra cash flow, investing in short-term ETFs can increase earning potential. The idea is investing in bonds that have short-term maturity. On the other hand, if you experience a period of cash flow deficit, you can easily liquefy your ETF via a trade.
You don’t have to have a lot of financial knowledge to know what your risk tolerance is. The stock market can be intimidating and risky, and purchasing an ETF can hedge certain risks. Adding a more conservative ETF can balance your portfolio by minimizing losses in other riskier investments you may have currently.
Industry-specific exposure simply means buying ETFs that follow indexes for certain market sectors. An investor can have exposure to an entire industry without cornering the market on all stocks of the sector. A single ETF can cover multiple sectors within the overall industry, so you can monitor those sectors for potential investment opportunities in the future, while getting a return at the same time.
Targeted ETFs Increase Exposure, While Controlling Risk
Targeted ETFs allow an investor to invest in a particular sector of an industry, even if the industry as a whole doesn’t look like a promising investment. This provides limited exposure to the industry without having to absorb a lot of the risks or downfalls associated with it. Investors often use targeted ETFs to fill gaps in their portfolio or hedge their positions depending on their other investments.
Every investor can put together creative investing strategies that fit their goals, risk tolerance and financial knowledge. There are virtually no limitations when it comes to the ETF market, and it is a great means of investing for both beginner and seasoned investors. Of course, with so many different strategies to consider, it can be overwhelming for some investors. That’s where Stock Investing Info enters the picture. We are here to break down different strategies tailored to your portfolio, so contact us today for assistance or advice.