How can you use exchange traded funds(ETFs)? When you get ready for a market turnaround, here are some ways to prepare when there’s a rebound and you’re in cash.
1. Use them for diversification. You don’t have to choose one stock. Google (GOOG) or Yahoo (YHOO)? Instead of choosing one or the other, you can get exposure to both and spread the risk. Technology Select Sector SPDR (XLK) holds both Google 4.6% and Yahoo 1.2%.
2. International exposure made easy. If overseas exposure is what you are after, then you can go two ways; A broad-based international funds such as Vanguard All-World ETF (VEU) gives exposure to various countries such as Canada, United Kingdom and Australia in one fund. Or a single-country fund can give the right amount of exposure for a specific need within a portfolio. iShares MSCI Austria (EWO) gives exposure to Austria and also gives a portfolio the exposure to Eastern Europe.
3. Target Specific Sectors. ETFs are great for well-rounded exposure to a certain sector. Bonds ETFs, for example, can also be used to get diversified access to an area that was once cost-prohibitive for most investors. Utilities Select Sector SPDR (XLU), iShares Dow Jones Transportation Average (IYT), iShares Dow Jones U.S. Telecom (IYZ), CurrencyShares Japanese Yen (FXY), and iShares S&P GSCI Commodity Indexed Trust (GSG) are all examples of ETFs that give investors simple, targeted access to a specific sector.