If you’re a person looking for a new way to increase your market exposure and diversify your portfolio, adding ETFs to your strategy may be a good idea. Buying and selling ETF is a new way to invest and increase your money through stock exchanges. For some, this may work in multiple ways.
Investors can efficiently manage risks by taking the counter position with a correlating ETF. This is because people whose portfolios include market exposure to certain sectors can easily purchase and short sell ETF.
Investors can also gain international market exposure. These markets offer potential growth through purchasing a foreign ETF which follows an index of particular country. This exposure can also be acquired by including a foreign currency ETFs in a portfolio.
If you want to be more familiar with a certain industry, buying an industry ETF will increase your industry exposure. Industry ETFs also follow indexes for certain market sectors. This makes it easier for you to be involved in a market without having to interact with major market players.
Through ETF, you can also utilize cash flow. In periods of excess cash flow, the extra money can be used to purchase a short-term ETF to gain potential return. Even in times of cash deficit, ETF can be liquefied easily
with single trade.
It can also be used during management transitions. Portfolio’s accountability can be changed as funds and portfolio managers may leave financial firms and change positions. During this transition period, the purchase of an ETF will help in bridging and compensating the risk exposure.