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Top Strategies for ETF Stocks (Part 1)

30 October 2007 - Features - Editor

Anyone can buy or sell Exchange Traded Funds (ETF) stocks, but an almost secret club of very large and cash-rich individuals and institutions determine their values. Ask any circle of investor acquaintances and you will find that Mutual Funds are better understood than ETF stocks. Those with ring side seats on this exclusive trading ring tend to be reticent unless they are trying to shore up values of stocks in which they have just bought large blocks! The extremely large and relatively infrequent nature of trading in ETF stocks make small investors extremely wary about participating in them, which is really a pity because small fry should have level playing fields with the incredibly wealthy.

A systematic and sustained scrutiny of wins and losses in ETF stocks can be an invaluable learning experience for small investors. You may never attain membership of a privileged circle which has prior information of events that will have large impacts on blocks of shares, but there are no bars to acquiring professional investing skills. Executives who manage ETF stocks are highly prized, and command dream remuneration packages even before they finish with top business schools. Why not read and study as they do?

ETF stocks need to be segmented in case anyone wishes to unlock the secrets of success in their trades. Securities based on indices of Exchanges work very differently from ETF stocks that are based on sectors or commodities. There is no harm in becoming an expert in all types of ETF stocks over time, but a learner should take things in small and easy steps. Exchange index based ETF stocks are relatively safe buys for emerging economies such as in India and China, because appreciation is relatively assured. These securities are also useful for foreigners who want to trade in baskets of stocks in the United States, since Mutual Fund stocks are limited to citizens. US citizens may opt for ETF stocks to control their tax liabilities.

Investors in countries with decisive says on specific sectors and commodities would do well to use their ground zero insights to buy and sell ETF stocks. An ETF based on gold for South Africans, an energy fund for Middle East investors, and a nuclear energy fund for US citizens with political insights, are examples of baskets of stocks that are worth trading in based on domain expertise. It would help if trades in these types of ETF stocks are linked with specific events and target prices. This kind of target setting and modeling is part of professional ETF operations, and something for small investors to keep in mind for all parts of their portfolios.

Top Strategies for ETF Stocks (Part 2)

 


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