Top 7 Best ETF Trading Strategies for Beginners 2023

Due to its many advantages, such as low expense ratios, high liquidity, a range of investment opportunities, diversification, a low investment threshold, and others, exchange traded funds (ETFs) are the best option for novice investors. ETFs are great vehicles for a variety of trading and investment strategies employed by novice traders and investors because of these advantages as well. The best seven ETF trading tactics for beginners are listed here in no particular order.

Navigating the dynamic landscape of the stock market, investors find themselves evaluating a diverse range of options, including the intriguing BITI stock that has captured attention, potentially offering a pathway for growth and returns. Similarly, the Jepi stock and its associated price have become focal points in market discussions, with investors closely monitoring its performance.

Delving deeper into the financial realm, the concept of stock dividends associated with Jepi adds another layer of consideration for those seeking to optimize their investment portfolios. Beyond individual stocks, exchange-traded funds (ETFs) also come into focus, such as SKYY stock, JPST stock, and XLU, where each presents distinct attributes catering to varying investment strategies. Monitoring the XLU stock price and the XLY stock price, investors make informed decisions based on real-time fluctuations.

Diversification remains a key strategy, as evidenced by JPST, a popular ETF option, while ventures into more aggressive territory led to exploration of TQQQ shares. Meanwhile, the UYG stock, tied to the financial sector, captures the attention of those betting on its performance amidst economic shifts. WisdomTree stock enters the arena as an intriguing entity, contributing to the complexity of investment considerations. The BITI ETF, in particular, introduces an innovative dimension, appealing to those seeking exposure to specific market sectors.

In the realm of trading platforms, the mention of Moomoo trading underscores the role of technology in shaping investor experiences. Moomoo’s Cash Plus feature brings added convenience and utility to traders’ financial operations. For investors in Singapore, Moomoo SG emerges as a prominent platform, catering to local needs and preferences.

In summation, the world of finance and investments, exemplified by the keywords mentioned, forms a multifaceted ecosystem where informed decisions, diversification, and technology-driven platforms like Moomoo play pivotal roles in shaping the strategies of individuals navigating the complexities of the stock market.

Dollar-Cost Averaging:

As our first tactic, dollar-cost averaging is the most fundamental. The method of buying a fixed-dollar amount of an asset on a regular basis, regardless of the asset’s fluctuating price, is known as dollar-cost averaging. Beginner investors are often young adults who have been working for one to two years and have a steady income that allows them to save a small amount each month.

Such investors ought to set aside a few hundred dollars each month and put them in an ETF or a collection of ETFs rather than placing them in a low-interest savings account.

Asset Allocation:

For the purpose of diversification, asset allocation refers to allocating a percentage of a portfolio to various asset classes, such as stocks, bonds, commodities, and cash. Depending on their investment time horizon and risk tolerance, beginners can easily apply a basic asset allocation strategy thanks to the low investment threshold for the majority of ETFs.

For instance, due to their long investing time horizons and high risk tolerance, youthful investors may have 100% of their portfolio invested in equities ETFs when they are in their 20s.
They might switch to a less aggressive investment mix, such as 60% in equities ETFs and 40% in bond ETFs, once they enter their 30s and begin to experience significant lifecycle transitions, such as establishing a family and buying a home.

Swing Trading:

Swing trades aim to profit on big swings in stocks or other financial assets, such as currencies or commodities. They can take days or weeks to complete, in contrast to day deals, which are rarely kept open overnight.

Because of their variety and narrow bid/ask spreads, ETFs can be employed for swing trading. Additionally, because ETFs are available for a range of investment classes and industries, a novice may decide to trade an ETF that is based on a sector or asset class in which they have some specific experience or understanding.

Sector Rotation:

Using ETFs, beginners can also undertake sector rotation depending on different economic cycle stages. Consider an investor who purchased shares of the iShares Nasdaq Biotechnology ETF (IBB) to invest in the biotechnology industry.

By using The Consumer Staples Select Sector SPDR Fund (XLP), an investor can exit this ETF and move into a safer sector like consumer staples.

Short Selling:

For the majority of investors, short selling—the sale of a borrowed securities or financial instrument—is a highly risky endeavour, so it’s not something most novices should try. The benefits of shorting using ETFs over shorting individual equities include lesser danger of a short squeeze, a scenario in trading where a security or commodity that has been heavily shorted shoots upward, and much cheaper borrowing costs.

A trader can profit from a wide investment topic by engaging in short sales through ETFs. Therefore, if an advanced novice (if such a term even exists) wants to start a short position in developing markets, they can do it through the iShares MSCI developing Markets ETF (EEM).

However, take notice that due to the much higher level of risk involved, beginners should avoid double-leveraged or triple-leveraged inverse ETFs, which aim to provide outcomes equal to twice or three times the inverse of an index’s one-day price move.

Seasonal trend betting:

For newcomers looking to profit from seasonal trends, ETFs are a good instrument. Let’s take a look at two popular seasonal trends. The first is referred to as the sell in May and leave phenomenon.

The SPDR S&P 500 ETF can be shorted to take advantage of the general market downturn trend. The short position should be closed in late October, just after the market gyrations characteristic of that month have taken place.

A novice can benefit from seasonal gold strength in a same way by purchasing units of a well-known gold ETF, such as the SPDR Gold Trust (GLD), in late summer and liquidating the position after a few months.

Keep in mind that seasonal trends may not always materialise as expected; hence, stop-losses are typically advised for such trading situations to limit the danger of steep losses.

Hedging:

In a sizable portfolio, maybe one acquired as the consequence of an inheritance, a novice investor may occasionally need to hedge or protect against downside risk.

Let’s say you inherited a sizable portfolio of American blue chips and are worried about the possibility of a significant drop in the value of American stocks. Purchasing put options is one option. An alternative method is to start a short position in broad market ETFs like the SPDR S&P 500 ETF or the SPDR Dow Jones Industrial Average ETF (DIA), albeit this is less common because most newcomers are unfamiliar with option trading strategies.

Your blue-chip equities position will be adequately hedged if the market collapses as anticipated because profits in the short ETF position will more than cover any losses in your portfolio. Keep in mind that if the market rises, your gains would also be limited because your short ETF position’s losses would balance any gains in your portfolio. However, ETFs give newcomers a rather simple and effective way to hedge.