Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Monday, 9 March 2015

ETF Strategies


We talked about the benefits of investing in ETFs in the previous article.
Link to previous article:
Today, this article will be talking about the strategies that can be employed when using ETFs!
Personally, I am not a technical investor but a fundamental one.
Thus the strategies suggested will not require the use of technical charts etc.

For me, there is a passive approach and a slightly more active approach.
I think both strategies are suitable for investors who do not wish to take a very active role in their investment portfolio (changing only once every half yearly if required)

Strategy 1: Passive Strategy:
I would recommend a buy-&-hold strategy, investing in low cost ETFs that tracks the index (S&P500, Straits Time Index, Hang Seng, FTSE, etc).
You can choose to invest in your country's own index ETF or even better, invest in a global market ETF which tracks the whole world's stock market (allows you to capture the rising emerging market while owning the developed nations' market).
Some examples of global index ETFs include iShares MSCI ACWI Index Fund and Vanguard Total World Stock ETF.
Over the long-term, buy-&-hold still remain as a good strategy!
This can be like a savings plan, investing a little of your retirement savings into a index fund every month.

Strategy 2: Slightly Active Strategy
This approach requires a little more active role every quarter or half a year.
As per written in the books below, there are statistical evidence showing that every once in a while, certain sectors will tend to perform better than the others.
The approach to this is to invest in those sectors when it seems like the right time and try to get out before the sector cools off.
This is tough, especially in getting the timing absolutely right. As per my view, I always think that if I can capture just 50% of the full upside, it is good enough for me. Because I believe that I am never that smart to be able to buy on the absolute bottom and sell at the absolute top!
'Greed is good', over-confidence is not!
You could also use ETFs to invest in certain sectors/industry that you think might outperform the average. you could invest in ETFs that tracks that specific sector to capture that sector's upside.


Of course, which ever strategy you choose to use, it is always best to read up on them first.
I would recommend 2 books that I have read before below.
There are many more books around that are about ETF investing and sector investing.
I have read quite a few of them, but I would strongly recommend below 2.
I recommend reading both because 1 focus more on sectors than ETF while the other focus more on ETFs than sectors - they complement each other well.

For more on sectors than ETFs, this is the book:


For more on ETFs than sectors, this is the book:


These books can be borrowed from most public libraries!
Happy Investing! :D

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2 comments:

  1. hey man! great blog there. you recommended 2 books on ETF. However the names were not displayed on your blog

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    1. Hi there. I not sure if there's a bug or not but we pasted 2 Amazon links to the books that we recommended. You can find here:

      http://www.amazon.com/gp/product/0470592508/ref=as_li_tl?ie=UTF8&camp=1789&creative=390957&creativeASIN=0470592508&linkCode=as2&tag=invesstab-20&linkId=4QT3JIOIK37VH323

      http://www.amazon.com/gp/product/B007RT1QR8/ref=as_li_tl?ie=UTF8&camp=1789&creative=390957&creativeASIN=B007RT1QR8&linkCode=as2&tag=invesstab-20&linkId=SZYNGZ2YCFHNXUKD

      Just a heads up. These are Amazon affiliated links and should you purchase the books from our links, we will receive a small commission. Thank you for your support and hope you can continue following us on this blog. :)

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