Fund TrackingInvesting in exchange trading funds or ETF’s require following a certain strategy or plan. Careful planning and a better understanding of such investment options may help minimize potential losses and improve the level of profit for the investor. Here are some important strategies to consider when investing in ETF’s.

Sector Investing

Investing in ETF’s may be a good option for those investors who plan on putting up funds to invest on a certain industry. Exchange traded funds are quite attractive in that it allows investors to place investments in a certain industry or sector of the market on the international level that is not usually available on the US exchanges alone. What makes them even ideal is that ETF’s can be shorted even if it is on a downtick, unlike stocks.

Investing Permanent Cash

If you have some permanent cash in your portfolio that you would unlikely be taking out any time soon, you might consider investing it on short duration bond ETF’s instead of those funds at the money market. Bond ETF’s comparatively pay higher yields than money market funds.  But make sure that the money you invest on it is one that you would not be withdrawing for sometime. Brokerage fees to sell your bond ETF’s can sometimes go high.

ETF Portfolio

Having an ETF portfolio allows you to invest on a variety or mix of assets at any one time. These funds track index performance of certain markets and not the individual stocks or bonds. This will help provide you with a more balanced investment on a certain market especially if you are a neophyte in a certain market sector. By having an ETF portfolio, you might miss out on certain stock specific gains. But at the same time, you might also be avoiding stock specific losses along the way.