The chance to invest money and feel like you have invested in a diversified fund is appealing to many. It is one way to manage their risk profile. Some like this diversification but find mutual funds don’t allow you to take advantage of intra day changes in market prices. For these investors Exchange traded funds or ETF trend trading provides a suitable investment vehicle.
A mutual fund diversifies risks by pooling the funds of a number of investors and using this pot to be a number of stocks. But the investment is limited to a price based on the net asset value at a point in time. There is little chance to capitalize on the movements in the market during any trading day.
ETFs on the other hand are a pooled fund but are listed on the stock exchange and can be traded like stocks. If the value of an ETF changes during the day because of announced results or market speculation you can take advantage of this – just like with a normal stock purchase.
With ETFs it is possible to use share market trading techniques such as put and call options and to even partake in short selling arrangements if you feel this is the way the market will go.
Smart investors research ETF trend trading to be in the know when market variations occur. Armed with knowledge they can buy and sell to take advantage of market conditions.
Trend trading is a risky business. Risky in terms of the fact no returns are guaranteed and you are depending on your understanding of the market and underlying conditions and drivers.
The nature of ETFs mean you can have the security of diversification, with the flexibility to trade as you want. Participating in ETF trend trading is an area of both opportunity and risk. Make sure you are well informed.
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