Some of the main reasons why lots of people decide to invest in ETFs are their low expense ratio and high levels of liquidity. However, these are not the only arguments that justify their popularity today. A low threshold for investments and a large number of choices traders can enjoy also contribute to their success. If you are new to the scene of trading and you are interested in getting acquainted with ETFs, these next few tips and strategies should help you get started.
Tip #1: Use Your Age To Your Advantage
Allocating assets such as stocks, cash or commodities for diversification reasons is called asset allocation and it is one of the most powerful tools beginners could use when trading. For as little as $25 per month, a new investor can take full advantage of the low investment threshold for the majority of ETFs and use simple asset allocation strategies to his benefit. It is a matter of time availability and tolerance to risk that characterizes various stages of our lives.
For example, if you are in your twenties, you have every chance to become fully invested in equity ETFs; you have a lot of free time on your hands and your tolerance to high risks is also likely to be on the high end. If you are in your thirties, on the other hand, you are probably getting ready for some big life changes. You may want to buy your first home/car or start a family. In other words, you will be looking at a lot more (and higher) expenses that will make you be more cautious and less eager to take higher investment risk.
Tip #2: Use The Dollar-Cost Averaging Strategy
This is, by far, the most common type of ETF investment strategy for novice traders. It refers to the process of regularly buying a fixed-dollar amount of a certain asset while disregarding the changes in its price range. Most new traders are young adults with little experience in the workforce and stable incomes that allow them to put money aside each month. The general advice is for these investors to place their savings into an ETF instead of opting for regular and less profitable saving accounts.
Traders who opt for the dollar-cost averaging approach need to be well disciplined when it comes to financial activities. This will allow them to gather a larger number of units when ETF prices are low, and a smaller number of units when the ETF prices are high. The trick is to be as disciplined as possible and the payouts should automatically come to you in the long term. If you plan on keeping your trading papers, cash or even golden bullion at home, you may want to contact a locksmith for residential needs. Have all your entryway locks checked for faults and problems and fix, re-key or replace them for enhanced security. Deadbolt locks added to regular locksets on a front door could make a huge difference in case of a break-in attempt. Electronic or smart locks that rely on numerical keypads, smartphones or Bluetooth technologies are also excellent additions to home security strategies.
Tip #3: Take Advantage Of Sizeable Stock Swings
Swing trading is another powerful investment strategy for newbies; the main idea here is to take full advantage of stock or currency swings. This means keeping a close eye on all changes on your favorite stocks for a few days up to a few weeks in order to get the desired results. With the help of their high versatility and increased number of investment options, traders can select, ETFs are an excellent choice. Investors can choose a sector they are familiar and enjoy a smaller degree of susceptibility to downward price movements. Traders with minimum levels of experience will be better protected against capital erosion, yet another powerful argument that makes them so popular and sought after.
Tip #4: Bet On Seasonal Trades
ETFs are excellent tools that newbies can use to capitalize on their seasonal trends. American equities tend to perform less than ideally between May and October, compared to the November-April timeframe. Gold investments made between September and October are prone to do better, thanks to the Diwali festival and the traditional Indian wedding season that boots the demand. All of these changes, weaknesses and strong points need to be tracked down, observed and used to the best advantage of investors. New traders can A beginner can invest in a few units of gold ETFs at the end of the summer and decide to close out the position in a few months for the best results.