In this article, we will take a look at ETF investing strategies for beginners. If you are a beginner investing in the US stock markets, you may not have the expertise to pick stocks. So, it makes sense to have an ETF-only portfolio. You can read about the benefits of investing in ETFs here

First, we will answer the question- what is an ETF? An ETF stands for exchange-traded funds. It is a collection of many stocks/bonds that are traded under one fund, very similar to mutual funds. However, unlike mutual funds, ETFs are traded on the US stock exchanges with real-time pricing. Here are 4 ETF investing strategies to get you started.

1. Dollar-cost averaging

Here, you buy assets worth a fixed amount of dollars regularly, irrespective of how the price of the asset changes. When you are a beginner in US investing, you should try and save a regular amount in an ETF or a group of ETFs every month, even if it is a small amount. This helps you build discipline in your saving process. The idea is not to time the market, but to spend time in the market.

2. Asset allocation

In simple terms, it means that you should not put all your money in a single asset category. Instead, you spread it across different asset classes like stocks, bonds, commodities, and so on. ETFs can help a beginner implement a basic asset allocation strategy. Your asset allocation should be based on your risk profile. For example, when you are in your 20s, equity ETFs may form a majority of your portfolio since you have time on your hands. With age and depending on your goals, you may decide to adopt a less aggressive strategy by increasing the proportion of investments in bond ETFs.

3. Sector strategy

ETFs are a good way to get exposure to a sector that would otherwise be difficult to invest in. For example, if you want to get exposure to the technology and robotics sector, you can look at thethe ARK Autonomous Technology & Robotics ETF. Or if you want to invest in the clean energy sector, you can invest in the ALPS Clean Energy ETF. It also lets you execute a sector rotation, where you can book profits from one ETF and choose to move to another ETF depending on economic cycles. This is particularly helpful in cyclical industries.

4. International diversification

ETFs also let you diversify in global markets apart from the United States and further diversify your portfolio geographically. For example, the Invesco China Technology ETF tracks the investment results of the FTSE China Incl A 25% Technology Capped Index and gives you exposure to companies like Tencent Holdings Limited and Baidu Inc. The iShares MSCI Japan ETF tracks the investment results of an index comprising Japanese stocks and some of its holdings include the Toyota Motor Corporation and Sony Group Corporation. Combining US and international investments help you create a truly global portfolio

With a lower expense ratio than actively managed funds, ETFs are a good investment option if you are investing in the long term. On Vested’s platform, we have created Collections so that you can easily discover ETFs based on geography, themes (such as mobility, cannabis or cloud computing), and asset-class.

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Our team members at Vested may own investments in some of the aforementioned companies/assets. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for an investor’s portfolio. Note that past performance is not indicative of future returns. Investing in the stock market carries risk; the value of your investment can go up, or down, returning less than your original investment. Tax laws are subject to change and may vary depending on your circumstances.

This article is meant to be informative and not to be taken as an investment advice, and may contain certain “forward-looking statements,” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, without limitation, estimates with respect to financial condition, market developments, and the success or lack of success of particular investments (and may include such words as “crash” or “collapse”). All are subject to various factors, including, without limitation, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors that could cause actual results to differ materially from projected results.

This video is meant to be informative and not to be taken as an investment advice and may contain certain “forward-looking statements” which may be identified by the use of such words as “believe”, “expect”, “anticipate”, “should”, “planned”, “estimated”, “potential” and other similar terms. Examples of forward-looking statements include, without limitation, estimates with respect to financial condition, market developments, and the success of or lack of success of particular investments (and may include such words as “crash” or “collapse”.) All are subject to various factors, including, without limitation, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors that could cause actual results to differ materially from projected results.

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