3 Conservative ETF Trading Tips

The world of ETF trading is a very dynamic one, with much opportunity for gain. ETFs are one of the more diversified investment options around. They are very similar to mutual funds because they have a diversified portfolio of securities that make up the fund. However, one key difference is that you can trade ETFs whenever you want. As long as the stock exchange is open, you can trade an ETF. This leads many people into risky ETF trading strategies that end up hurting them in the long run. Here are a few tips for employing a conservative ETF trading strategy. 

1. Do Not Over Trade

Many people that get their first taste of investing in the ETF market tend to trade too much. They think that if they are not buying or selling something, they are not doing anything. Therefore, they feel like they are unsuccessful traders unless something is happening. The thing that you have to remember about trading is that the best traders do not trade all the time. They wait for a profitable opportunity to present itself and then they jump on it. They do not have to be doing something just for the sake of action. Playing around with your money because you want to keep busy is a bad strategy.

In addition to not being smart for investment reasons, it also costs too much. Each time you trade an ETF, you will pay your broker a commission. This means that you have to make even more money from each trade in order to make a profit. Commissions can cut into profits quickly, if you are not careful.

2. Research Before You Buy

You need to do thorough amounts of research about the ETF before you buy or sell it. Listening to a morning program by an investment guru and doing what they recommend is not considered enough research. You need to make sure that you fully understand what is going on with an ETF before you become involved in it. Read the ETF prospectus and see exactly what it is made up of. Many people jump into investment decisions just because other people are doing it. This is usually a recipe for disaster. Make your own investment decisions with ETFs and base your decision on your personal research. You will usually have much better luck in the long run.

3. Diversify Your Portfolio

The great thing about ETFs is that they are diversified by themselves. They own thousands of stocks in different areas that make up the fund. However, the performance of an individual ETF can suffer over a certain period of time. Therefore, you need to diversify your own portfolio as well. Buy ETFs from several different industries and sectors. Make sure that you have done a good job of diversifying your own investments in this way and you will benefit greatly over the long-term. 

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