“All-Star” is what we like to call an advanced ETF investor or trader. If you’re an All-Star you have managed your own ETF portfolio by researching and selecting your own ETF investments for several years. If your approach is more active, you’ve been making several trades per week or per month for many years. As an All-Star, you are extremely proficient in organizing a portfolio of investments in different sectors, with diverse allocation profiles and varying degrees of risk. You have extensive knowledge of the stock market, bond market, macro- and microeconomic trends, and inter-market dynamics across different types of securities. Your knowledge may be so extensive, in fact, you may lean towards contrarian market views.
As an All-Star you are well versed in ETF nuances, and you know an ETF’s portfolio may not actually be as it seems. Not only do you understand that an ETF’s components or their weightings may not match the targeted index, but you may look to leverage this knowledge when it suits you. All-Stars may exploit concentrated ETF components by trading these ETFs instead of trading the concentrated company’s stock outright. You live by the traders’ tenet that liquidity is of paramount consequence and are not swayed to trade “by-appointment” issues, regardless of what’s the hot new thing.
Advanced ETF investors like you are likely well capitalized and wield the extensive knowledge to use your capital wisely. As an All-Star, you are fully aware of the various risks associated with ETFs, including specialized and non-traditional issues. All-Stars constantly use risk and reward to analyze trade opportunities and manage risk of existing positions. As an All-Star, you possess excellent risk management skills and don’t hesitate to adjust or exit a position when necessary. All-Stars understand upfront how all possible outcomes will affect not just portfolio holdings but also order placements.
You pore over an ETF’s prospectus carefully and repeatedly, examining the basket of securities it holds and the weightings of each asset, making sure the fund’s methods and objectives are inline with your own. You are fully aware of the volatility ETF values can experience and you realize that your full principal is at risk of loss. To mitigate risk where possible, you diversify your holdings, although you understand diversification cannot ensure gains or prevent losses from occurring. As an All-Star, you look beyond a successful track record because you know future gains may not necessarily continue. You are keenly aware of costs when trading ETFs and how they can impact performance. You realize although the component stocks of an ETF may pay quarterly dividends, this money may be retained by the fund manager as part of the fund’s fee structure.
All-Stars understand upfront how all possible outcomes will affect portfolio holdings. You likely track industry events assiduously and adapt as the marketplace evolves. Monitoring business news and the key events of pertinent sectors is second nature to you. All-Stars actively manage risk and potential opportunity. Even though you already know a great deal, an All-Star ETF Investor or Trader is always learning, always adjusting, always growing as a forever student of the market.
As an All-Star ETF Investor, here’s how you can round out your skills:
- Consider alternate methods for Determining Market Outlook
- Maintain full and complete knowledge of tax advantages and implications
- Work to assess your investments in light of your entire portfolio, not just individual holdings
- Learn about specialized or non-traditional ETFs to decide if they are right for you and your investment goals
All-Star ETF Investors can improve by:
- Continuing to use TradeKing’s ETF Screener for investment opportunities
- Refining your personal methods for finding investments
- Reviewing ETF strategies geared to the All-Star skill level
- Anticipating and planning for all possible outcomes for your investments, not just the positive scenarios
- Engaging members of the Trader Network to explain their investing or trading analysis
- Challenging members of the Trader Network with an alternative point of view
- Journaling your trades with Trade Notes to record your thought process
- Continuing to educate yourself in how to invest with other types of securities
- Attending or watching TradeKing’s free educational webinars, geared to the All-Star skill level
All-Star ETF Investors should steer clear of the following:
- Resist the urge to invest in specialized or non-traditional ETFs unless you completely understand the risks involved (leveraged ETFs, inverse ETFs, commodity ETFs, international ETFs, emerging market ETFs, etc.)
- Do not invest in illiquid ETFs with an average daily trading volume of less than two million shares
- Do not sell ETFs short without fully understanding the potentially unlimited risk involved
- Limit the role your emotions play in your investing strategy.