Manage Your Portfolio Like a Hedge Fund With ETFs

Investors are always looking to turn a profit on their portfolio, whether it is with stocks, bonds or exchange traded funds (ETFs).  By following the trends and watching fundamentals in the economy and globally, investors can take advantage of ETFs to move in the areas that are showing strength.

Worries about the credit crisis and falling dollar have sent investors to foreign-focused ETFs, reports Diya Gullapalli of The Wall Street Journal.  There are numerous international ETFs available from single country, to regional, to all world.  Traditional recommendations for international exposure in a portfolio was 20%, but many are increasing that allocation.  We do not hesitate to put in 50% for our portfolios, if the trends are right.

Currency ETFs are also available for the average investor to play the declining dollar.  There are currently eight CurrencyShares spanning the globe from Japan to Mexico to Europe.

With the latest subprime mortgage crisis, the housing and financial sectors have taken a beating.  But what if you shorted the sectors?  James Mackintosh for the Financial Times reports hedge funds that bet against U.S. home loans have become the most profitable this year.  There are ETFs available to short or magnify exposure to major indexes, without having a margin account. ProShares UltraShort Real Estate (SRS) is designed to double the inverse performance of the real estate index.

These investments don’t come without risk.  Know your risk tolerance and make sure that what you add to your portfolio fits with your financial goals.

Read the disclosure, as Tom Lydon is a board member of Rydex Investments.