Since the first exchange traded fund was introduced in 1993, the industry has grown at a rapid pace. Assets under management in the business have surpassed the $1.4 trillion mark due to the popularity of the tools and the various investment strategies they allow investors to use.
“The ETF’s stock-like quality allows the active investor to do more than simply trade intraday. Unlike mutual funds, ETFs can also be used for speculative trading strategies, such as short selling and trading on margin. In short, the ETF allows investors to trade the entire market as though it were one single stock,” Investopedia staff wrote.
The investing strategies that are available to ETF investors are numerous, due to the flexibility of tools. David Fabian of Fabian Capital Management on InvestorPlace explains some of the most beneficial ways to use ETFs for portfolio enhancement.
Investors can use a limit order and set stop losses with an ETF to help protect a portfolio from price swings and market volatility. An investor can set a downside price target using a limit order and if the market comes down to that point your transaction will automatically be filled. Plus, a stop loss in a position also helps retain capital amid a sell-off. This flexibility is character of an ETF, since a mutual fund only gets priced at the end of the day. [Special Report: Alternative ETFs]