ETF Rotation Strategies

Exchange Traded Funds (ETFs) now cover almost every possible market sector - from industrial sectors to country and regional sectors. Such breadth of choice allows for the creation of ETF rotation strategies that should allow an investor to get greater return by moving to the "hot" sectors no matter what the current market conditions are.

Broad Market ETFs

There are several types of ETFs that can be used to devise a profitable rotation strategy. The earliest type of ETF, represented by SPY and DIA as examples, track some broad market index. SPY, for example, tracks the Standard and Poors 500 Index, while DIA tracks the Dow Jones Industrial Average index. Another example of such an ETF is QQQQ which tracks the NASDAQ 100 index which is heavy in technology stocks. These broad based index ETFs allow one to devise a strategy to move into various broad based sectors when the time is right. For example, for extended periods it is sometimes true that technology stocks have outperformed the broader market. Other times, small capitalization stock have outperformed the market.

Sector ETFs

Other ETFs represent more narrow market sectors. These ETFs have proliferated in recent years, allowing a sector rotation strategy to be developed that looks to very narrow market segments to determine where to invest. Such ETFs as OIL (oil), GLD (gold) and SHY (short term bonds), allow a system to be developed that seeks to find which narrow market segment is likely to outperform in the near term and to move the assets in the system into such narrow segment until a better candidate is found. These ETFs provide some of the benefits of diversification that ETFs generally enjoy, while allowing some of the volatility that investing in narrow segments can enjoy also.

ETF rotation strategies must be nimble to move into the correct sector at the right time.

Regional Exchange Traded Funds

ETFs in recent years have been created for very specific country indexes -there are country specific ETFs for countries (or regions) as small as Hong Kong, South Africa and even Belgium. These country specific ETFs allow the investor to devise a rotation strategy that moves into the "hot" region and then out again when another region is poised to outperform. The last type of ETF that is useful for creating sector rotation strategies are the country or region specific ETFs.

ETF Rotation Strategies - the Possibilities are Limitless!

With all the exchange traded fund possibilities for the creative investor to look to - there never has been a better time to use ETFs to devise market outperforming rotation strategies.

Article Source: http://www.share.onlypunjab.com

Information provided by a leading expert in the creation of mechanical timing systems for the firm of Market Signal Systems LLC, providing ETF rotation strategies and investment information for exchange traded funds (ETFs) and the federal employees Thrift Savings Plan at ETF Rotation Strategies

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