Two ways to play ETF investment (a strategy suitable for all investors)

ETF is a very practical tool for U.S. stock investment. It is a very complex but deep and shallow investment tool. It has a wide range of applications and extremely flexible operation methods. It is definitely not worse than simple stock selection. It can greatly reduce investment risks and reduce the energy spent on investment. ETF is an extremely valuable investment tool for investors at different stages, and the methods and strategies used are different. The investment strategy of ETF is divided into three stages: elementary, intermediate and advanced. Each stage has different investment methods and investment targets.

Primary Play of ETF

Stock market risk comes from two aspects, one is individual stock risk and the other is systemic risk. Individual stock risk is the risk unique to a stock. Systemic risk can be understood as the overall risk faced by the market. At this time, all stocks in the market will be affected by these uncertain factors, and systemic risk is difficult to control. But individual stock venture capital ETF is the most effective way to control the risk of individual stocks, not one of them. ETF itself is an investment portfolio, which contains many individual stocks. The risks of individual stocks in the portfolio are offset and dispersed, leaving only systemic risks. Therefore, the risk of ETF will be much lower than that of direct investment in individual stocks, and the fluctuation of stock prices will be more moderate. The two major risks of the stock market are now cut in half, which is naturally more friendly to beginners. The best way to get started is to invest in index funds that invest in the US stock market. Fixed investment is an investment method that is most suitable for novices and those who do not have time to watch market research. To choose an ETF, you must first know which ETF you want to invest in, and which ETF you want to invest in, then look for ETFs in which sector, and then compare several important information and choose from them. Try to find larger management companies and well-known fund managers. Then look at the management fee and dividends. Of course, the lower the management fee, the better, and the more dividends, the better. In the primary game of ETF, it does not require too much judgment on the market, nor does it need to know too much about individual stocks.

Intermediate play on ETFs

The focus is on asset allocation. The return on investment in stocks consists of three aspects: stock selection, timing, and asset allocation. Timing and stock selection are the most concerned issues at the beginning. If you do well, you can indeed get higher returns in the short term, but in the long run, the impact of asset allocation on the return on investment is decisive. For the return on investment, timing contributes 2%, stocks contribute 4%, and the remaining 94% of the contribution rate comes from asset allocation.

The best way is still to use ETF. ETF optimized asset allocation is based on ETF passive investment as the core, and then coupled with multiple active investments as a strategy. Guaranteed to look for excess returns above the rate of return of the market. Simply investing in ETFs cannot meet the specific investment needs of each investor, and this allows you to adjust your core targets and core ratios in a timely manner according to your risk preference, investment time, and investment amount. Choose your core investment first. It is the best to directly choose among the three major US stock indexes. In addition to the best diversification, the option trading volume is also the largest in the market. These are all stock ETFs. If you want to further control the risk, you can consider adding bond investments to the core portfolio.

The choice of active investment, this part of investment varies from person to person. However, there is one thing to note, that is, the correlation with the core is best not to be too high. The choice of active investment does not necessarily have to choose stocks. You can also choose ETFs, such as industry ETFs or strategy ETFs. The effect of this kind of ETF is not bad, and it is very suitable for traders who do not have time. There is no absolutely correct answer to the allocation ratio. You need to adjust the allocation ratio according to your risk preference, investment time and investment amount.