Exchange Traded Fund Timing and Rotation
With so many exchange traded funds available now, it has become possible to maximize investment return by creating a strategy that rotates assets between exchange traded funds - such a technique can permit a trader to find sectors that are increasing in price no matter what the current market climate is.
Index ETFs that Cover Large Market Sectors
There are several types of ETFs that can be used to devise a profitable rotation strategy. The earliest type of ETF, represented by SPY and DIA as examples, track some broad market index. SPY, for example, tracks the Standard and Poors 500 Index, while DIA tracks the Dow Jones Industrial Average index. Another example of such an ETF is QQQQ which tracks the NASDAQ 100 index which is heavy in technology stocks. These broad based index ETFs allow one to devise a strategy to move into various broad based sectors when the time is right. For example, for extended periods it is sometimes true that technology stocks have outperformed the broader market. Other times, small capitalization stock have outperformed the market.
Exchange Traded Funds that Track More Specific Sectors of the Market
Sector rotation strategies are now practicable because of the number of specific sector ETFs that are now available. Exchange Traded Funds cover almost every conceivable sector of the economy, from transportation, to energy and gold. These ETFs are specific enough to ensure that at least some of the market segments will move up no matter what phase of the economic cycle the economy is in. Thus, sector rotation strategies that can give great returns are now possible without investing in individual stocks.
Specific sectors can, of course, move dramatically within a short period of time - making selection of the proper exchange traded fund critical to any ETF rotation strategy.
Regional Exchange Traded Funds
The last type of ETF that is useful for creating sector rotation strategies are the country or region specific ETFs. These country specific ETFs allow the investor to devise a rotation strategy that moves into the “hot” region and then out again when another region is poised to outperform.
ETF Rotation Strategies - the Possibilities are Limitless!
Exchange Traded Funds exist that cover almost every part of the world’s markets - aggressive traders and investors have a whole world of opportunities (literally) to profit from.
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