ETF Blanket Exposure

Posted By Darren Winters on Feb 6, 2022


ETF Blanket Exposure

Exchange-Traded Fund ETF blanket exposure to a specific sector, to a geographical region, to groups of commodities, can be a low-risk, high-profit potential way of gaining upsides in the market.

What is an ETF?

An ETF is a basket of securities that tracks an underlying index. So there can be ETFs for stocks, bonds, real estate, and cryptocurrencies. 

There is even now an anti-technology innovation ARK ETF which can be a hedge in an investor’s portfolio to protect against the dreaded drawdowns, the retracements, which can be up to 60% from ATH in stocks of emerging innovative tech rebel companies.

The advantage of ETF blanket exposure in stocks is that it allows the investor to benefit from a sector boom and limits the downside risk of mal investing in an underperforming stock, in the sector, due to poor management performance.

ETF blanket exposure is similar to betting on all the horses in the race

ETF Blanket Exposure

In other words, the investor is putting their chips on as many numbers. ETF blanket exposure increases the probability of a win and reduces risk to capital.

So, say, for example, an investor wants to benefit from the upside potential of stocks rising in the fourth revolution but they don’t know which technology horse is going to be the next Amazon or Google.

The technology innovation ARK ETF is a good horse to bet on for those wanting to ride the technology wave.

But because the central bank’s monetary policy has become a stop-go policy, pivoting from inflation-fighting Hawks to asset price economy stimulating Doves, we are likely to see wild volatility swings.

So a pro-technology innovation ARK ETF and SARK ETF combination make strange bedfellows in a portfolio, but their combination can tame the technology disruptors hysterical price swings.

The Nasdaq tech-laden technology sector, which prospers when servicing the debt is low, tends to be sensitive to a hawkish Fed tightening policy.

Buying ETF blanket exposure and owning an ETF with negative correlation to each other could help reduce volatility in a portfolio

So an ETF blanket exposure enables an investor to see the investment landscape from a macro geopolitical perspective, then decide which asset class, stocks, bonds, commodities, cryptocurrencies, real estate is likely to outperform, and then buy ETF blanket exposure.

Within each asset, investors can take subsection ETF blanket exposure

An example of fixed-income bond ETFs is the SPDR Portfolio Long Term Treasury ETF (SPTL), or the Vanguard Long-Term Treasury ETF (VGLT )

There is also an SPDR Gold Shares (GLD) which is the largest physically-backed gold exchange-traded fund (ETF) in the world. 

As an example above, blanket exposure is beneficial when an investor believes that the owning sector will outperform better than another sector. So, let us assume an investor wants a defensive play, then here are nine best consumer defensive funds ETFs. 

But what if you want to ride multiple long waves, where macro policy shifts to support strategic industries and the long waves of innovation, then the iShares Semiconductor ETF could be your ETF blanket exposure to the booming chip sector.

Mega alpha is buying the winners within the winners, and that sometimes is not so obvious. Momentum chasing might not work and sometimes it is the underperformers that benefit from policy change and implement new winning strategies, which can end up returning big wins. Could the winning chips be on Intel (INTC)? 

Submit a Comment

Your email address will not be published. Required fields are marked *

Subscribe to my Investment Newsletter and receive the FREE video:  3 OF DARREN’S BEST INVESTMENT STRATEGIES

You have Successfully Subscribed!

Pin It on Pinterest

Share This

Share This

Share this post with your friends!