In a down economy, many average investors are unsure of how to properly utilize exchange traded funds (ETFs) and other investment tools to maximize returns and build a strong portfolio.

Here are a few ways:

• Diversify your portfolio and keep it well-balanced.  Always know what is in your portfolio and don’t be afraid to re-balance it to keep in line with your long-term investment goals. Knowing what you own is a cinch with ETFs – you can get current holding information in a variety of places, including the provider’s website.
• Take a look at the fixed-income portion of your portfolio.  It is vital to keep up with current economic trends and balance your portfolio accordingly.  As the economy recovers, corporate bonds and high-quality municipalities are offering higher yields than Treasuries, which performed well last year, state Carla Fried, David Futrelle, Amanda Gengler and George Mannes of CNN Money.
• Set realistic goals and don’t always try to hit a home run or make predictions. ETFs can help you manage risk by having an entry strategy (and using it!).
• On the flip side, have an exit strategy, too. We use an 8% stop loss, so that if a position continues to decline, it helps stop the bleeding.
• Check out the expense ratios. While ETFs are known for being cheaper than mutual funds (on average), not all of them have low, low prices. They are still good bargains, but you should know what you’re getting, too.

Remember, when managing your portfolio, always know what is under the hood, stay diversified, have a strategy and don’t overextend yourself.  You are the only one that truly controls the destiny of your portfolio.

Kevin Grewal contributed to this article.

Tags: Bond ETFs, Corporate Bonds, ETF 101, Treasury Bonds, Trend Following