Thursday, September 09, 2010

Diversification with Exchange Traded Funds

Investment Optimization
Click Here to Use Exchange Traded Funds to Optimize Diversification


"Learn to lower the volatility risk in your portfolio with one simple risk management strategy"

5 Key Risk Categories

The average American investment portfolio is not properly diversified, and contains a concentration of risk that could easily be reduced. Imagine how easy it would be if you could use one simple strategy to reduce all 5 of the following common portfolio risk categories?

* company specific risk

* currency risk

* correlation risk

* geographic risk

* investment style risk

The smart use of Exchange Traded Funds (ETFs) can achieve the goal of reducing portfolio volatility risk. ETFs are index funds that represent a basket of securities, they can be bought or sold intraday like a stock, and are available in a broad range of indexes, asset classes, sectors, global regions, and investment styles.

How We Practice Diversification with Exchange Traded Funds (ETFs)

The Sector Timing Report exclusively features exchange traded funds so that subscribers can easily construct an upgrading portfolio that can also be properly diversified and reduce overall volatility risk.

ETFs Easily Reduce Company Specific Risks

Buying exchange-traded funds substantially reduces company specific risks as you are buying a basket of companies, and an adverse even effecting 1 company does not materially affect your investment basket. Examples of company specific risks that can pummel single stock prices are fraud, bankruptcy, adverse litigation, earnings misses, and natural disasters.

ETFs Can Offer Diversification Across Economic Regions and Geographic Risk
The US market is only 1 of 6 major global economic regions in the world. The European Monetary Union, Japan, Far East, Americas, and UK represent 5 other major economic regions that exist in the world. Exchange-traded funds offer a variety of economic region funds that can give instant global diversification.

ETFs Offer Diversification of Currency Risk

Any changes in the USD, Yen, Pound or Euro can have dramatic effects on a portfolio once exchange gains and losses are factored back into your home currency. Maintaining a portfolio that is diversified across the 4 major global currencies can reduce your portfolio currency risk. ETFs offer a range of currency and regional funds that can offer this diversification.

ETFs Offer Easy Diversification of Correlation and Investment Style Risk

The average American portfolio tends to have a high concentration of investment style risk that is highly correlated to large cap style investing and the S&P500 index. Without adequate diversification into other types of asset classes, currencies, or regions, when the S&P500 market tanks, so do most average American portfolios. The use of ETFs can help to dramatically
lower correlation risks.

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Click here for more information, resources and investing trading strategies for exchange traded funds.