If you use exchange traded funds – ETF’s – as an investment vehicle then what is the best technique to use to maximize returns? Fundamental analysis or technical analysis?

Fundamentals are where your aim is to predict ETF futures prices taking into account various factors such as supply, demand, weather conditions, interest rates, government policy and various other factors that affect the economy. If you are an economist then you are in a good position to be able to monitor many different factors on a daily basis with any thoroughness.

Now though there is a way to invest your money and at the same time spread the risk in the same way you
would do if you were to use mutual funds. These are not brand new to the market place but have not been
around for that long either – exchange traded funds or ETF’s as they are known.

Mutual funds reduce and diversifies risk by utilizing the funds from its investors and pooling them to purchase stocks. This is a limited way to improve the chances of making money because there is no flexibility to trade during the day. If you want to buy or sell you have to wait until the end of the trading day and take the fixed price then.

Although ETF’s are also pooled funds they are listed on the stock market and thus can be traded as you would any other stock. In other words if the value of your ETF goes up (or down) you can sell or buy within seconds – by either a quick call to your broker or managing your account online.

Ideally you want to have a system in place where you are regularly exposing a small proportion of your funds to the risk. If you can do your market analysis in a fairly short time each day, rather than spending hours on it and at the same time you have some accuracy from that analysis then you are ahead of the game.

So over all, exchange traded funds are a great way to invest capital. You have the security in diversifying your shares while at the same time having the flexibility of intra-day trading to maximize gains and minimize potential losses. Furthermore you can use put options to minimize risk further and other forms of options to add to investment flexibility further. Good luck with your trading!

Learn more about etf funds. Stop by www.etftrading.co.uk where you can find out all about commodity etf and what they can do for your investments.

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