5 Best ETF Trading Strategies for Beginners

1. Dollar-Cost Averaging

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Dollar-cost Averaging (DCA) involves consistently purchasing a fixed-dollar amount of an asset at regular intervals, irrespective of its changing market price. Typically, novice investors, often individuals in the early years of their careers with a steady income and the ability to save monthly, are encouraged to adopt this approach. Instead of depositing funds into a low-interest savings account, these investors can allocate a few hundred dollars each month towards investing in an ETF or a diversified portfolio of ETFs.

Implementing a DCA strategy can mitigate market risk because the scheduled purchases acquire shares at varying entry prices, potentially reducing the average cost, particularly in a bear market where prices are declining. Automating this approach is convenient through certain brokerage platforms that offer select ETFs at zero commission, thereby minimizing the overall investment cost, especially when making regular interval purchases.

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