Leverage Broad Market Moves

Potential Profit from A Broader View. ETFs are effective vehicles for investors who want to participate in market-wide trends without having to scrutinize individual stocks.
Here are four examples of how ETFs can help:

Example 1: Leveraging Broad Market Moves
If you believe the overall market is going to rise, but see no reason to tie your investments to the risks of any particular security or sector, ETFs allows you to track broad indexes of stocks and bonds, such as the S&P 500 Index and the Lehman Brothers U.S. Aggregate Bond Index.

Example 2: Diversification into International Markets
Even if you are not familiar with specific securities in areas outside of the United States, ETFs can help you diversify into international markets or focus on specific regions and countries.

Example 3: Targeted Investing in Specific Market Sectors
You can use ETFs to participate in trends affecting specific industries, such as the telecommunication, technology, energy, consumer goods and healthcare areas. Similarly, you can target specific capitalization ranges by investing in ETFs that mirror popular indexes of small-, mid- or large-cap stocks. And you can target specific maturity ranges through fixed-income ETFs.

Example 4: Reducing Risks Through Hedging Strategies
By hedging with ETFs that track specific indices or sectors, you can help protect your overall portfolio from periodic downturns in areas of the market you consider vulnerable.

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