The expansion of the exchange traded fund (ETF) industry has not only given investors more choices in what they choose to invest, but more options and flexibility in their overall portfolio approach.

The number of ETFs available in the market may be confusing, but there are so many choices that investors can customize their portfolios according to their personal preferences and strategy. The ultimate goal is usually the same (to make money), there are two primary categories investors fall into: those who use a fundamental strategy and those who prefer a sector strategy, explains Don Dion for TheStreet. We throw in a third strategy below, too.

Fundamental Strategy: Fundamental ETF portfolios are suitable for investors looking to take advantage of the cost efficiency and tax efficiency of ETFs over an extended time period. These portfolios are usually not traded very often and provide exposure to the broad market while meeting their needs for income.

Investors who find this strategy appealing often cite taxes as the primary lure.

  • iShares Dow Jones Select Dividend Index (NYSEArca:DVY): up 4.8% year-to-date

  • PowerShares QQQ (NYSEArca: QQQQ): up 42.9% year-to-date

Sector Strategy: A sector ETF strategy is designed to actively capture market trends. Some prefer  a momentum-based strategy to indicate the best times to enter and exit funds. ( The strategy you choose is just as important as the approach). These portfolios are considered active, as they are traded and monitored constantly.

  • iShares iBoxx $ High Yield (NYSEArca: HYG): up 23.8% year-to-date

  • PowerShares DB U.S. Dollar Bullish (NYSEArca: UDN): up 8.1% year-to-date

A Blend Strategy. We use trend following by monitoring the 200-day moving average in order to find those areas that are moving. By getting in and out of the market at set signals, you give yourself the opportunity to be in the markets for any potential long-term uptrend. The stop loss enables you to put a cap on your losses. The benefit of relying on market signals to determine where and when you invest also removes the “noise” that emotions can generate and cloud your judgment. Any ETF works with this strategy, whether it’s a broad-based, plain-vanilla fund or a more exotic, niche ETF. (How to get in on the rebound).

Always do some research on what you are implementing and consider the liquidity, underlying stocks and pricing taking place in the ETFs you choose.

For more stories about trend following, visit our trend following category.

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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