To certain investors, the word “speculative” is a dirty one, indicating money down the drain and high risk. Can exchange traded funds (ETFs) give more opportunity to so-called speculation and help alleviate the apprehension?

Although many investors feel let down or betrayed by their strategy or by certain investment tools, there are plenty of opportunities in market ups and downs that can deliver high reward. If you have the stomach for it, speculative investing should be done with a portion of your money and not the lion’s share, explains Andrew Leckey for The Chicago Tribune.

There is some risk involved with this style of investing, but with high risk comes greater potential for high reward. For would-be speculators wary of betting on an individual stock or bond, ETFs that hold a pool of stocks or bonds in a specific category and spread out the risk offer opportunities.

The major fixed-income indexes have recovered very well, while certificates of deposit and money-market funds are paying dismally low rates right now. If there are signs of economic recovery, it could bode well for the corporations that are issuing bonds. The world’s emerging markets also offer speculative potential, with countries such as china, Brazil and emerging Europe on investor’s watchlist.

Even if there is opportunity, await the trend first. Mind the trend lines, and watch for a crossover of the 200-day moving average. Also, be sure to have a stop-loss in place and as well as an entry and exit plan.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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