Top 5 Reasons To Trade ETFs

Today I would like to discuss five of the best reasons to invest in the Exchange Traded Funds market (ETFs).  I think that these reasons, are some of the most compelling reasons to join the ETF trading revolution!

1. EFTs are a great way to invest in the Broader Market.

Whether you are an experienced trader or a beginning novice a great place to invest is in the broader market.  ETF’s are perfect investment vehicles for trading the overall market with large cap index  EFT’s like the Diamond’s which follow the Dow Jones 30 Industrials, or the SPDR’s which follow the broader but still bellwether stocks that represent the Standard and Poor’s 500.  The advantage of using an Index ETF is that you can get the benefit of trading the overall market which has a tendency to trade in longer-term trends over time. You can follow just about any stock index with ETF’s whether you follow the largest stocks indexes or ETF’s that follow small cap and medium cap stocks without having to buy a bunch of individual stocks or even high cost mutual funds.

2. ETFs are great way to invest in a specific Market Sector.

Instead of trading in the broader market or foreign markets, perhaps you want to invest in a specific sector in a specific industry such as gold or other precious metals.  Than simply, buy a Gold or Silver mining ETF.  If you are looking to invest in a specific industry like pharmaceuticals or technology then find the appropriate industry ETF.  This is much easier than owning a basket of industry stocks directly.

3. EFTs are a great way to invest in Foreign Stock Markets.

With Foreign Stock ETF’s you can invest in the foreign markets just like you can invest in a domestic market by buying Foreign Index ETF’s  There is a wide variety of ways to invest in the foreign markets.  There are emerging market ETF’s, Foreign currency ETFs and ETFs for specific countries like China or India. Investing in foreign markets has never been easier with all of the different classifications of foreign market EFTs.

4. ETF’s are a easy way to Short the Stock Market.

I know it sound a bit crazy at first, but, you can buy an EFT that invests in short stock positions.  These are called inverse ETFs. They will move up as the underlying securities move down much like put options do without having to learn how to trade the options market directly which can be tricky especially for less experienced traders.

5.  ETFs are a great way to invest in commodities.

If you have ever wanted to invest in commodities, but it always sounded too complicated or too risky then commodity ETFs may be the answer.  With commodity ETFs, you can emulate the price of oil, cattle, or orange juice without having to directly buy commodity contracts or learn about direct commodity trading.

In conclusion,  EFT’s may provide a great way to extend and diversify your portfolio into markets and sectors you might have never dreamed possible.  However, as with any investment, do you homework, talk to advisors you trust and know what it is you are buying before you put your assets on the line.