ETFs are an efficient way of investing in markets or sectors for which one would otherwise have to hold multiple positions to reproduce. This is especially true is you have a limited capital to invest, say up to 10k Euro or Dollars.
We opened a 2% position in $EWZ which reproduces the Brazilian stock market. While the outbreak seems to be nearing the peak only now over there, the stock market fall has been so significant that some of the stocks in that market are greatly undervalued, e.g. Petrobras. As always, we will be vigilant and prepared to act if the outlook changes.
We also hold a 2% position in $INDA which mirrors the Indian stock market. I have opened this one due to a favourable technical pattern, something I do rarely as I am mainly guided by fundamentals when selecting stocks and ETFs.
At present I have 21 open trades (4 of which at $SQQQ trades bought at different price levels). When I am fully invested, I target having 30-40 open trades with an average percentage of 3% each, though some positions may be higher or smaller depending on the strategy. It is very important to be diversified across the various sectors but also to have enough positions to avoid being severely affected by a major swing in an investment with too high a relative weight. While this limits the potential for greater gains, it does protect you on the downside and makes your portfolio more resilient.
Here are the 4 trades in my eToro portfolio from this past week (May 18th to May 22nd):
- $AMAT +5%
- $XLK +2 %
- $DUE.DE +2% (thanks to the positive Zew numbers in Germany, we might be back)
- $EWZ +2% (we might be back in this one too)
The US stock market is up about 3% this week and 5 of my positions have outperformed them, namely $KO, $SYF, $USO, $IRM, $VIAV. The European stock markets have also grown by about 2%.
In my eToro portfolio I am 35% in cash, 8% in hedges and the rest are long positions in stocks and, to a lesser extent, ETFs and cryptocurrencies.