5 ETFs Every Diversified Investor Should Trade

This article originally appeared on Traders Reserve . If youve been long stocks
over the past six weeks, then youre probably sitting on some very nice gains.
Thats because stocks have seen a substantial surge nearly across the board since
dipping to their recent lows. In fact, since the S&P 500 fell to its most-recent
low on March 16, the broad measure of the market is up more than 7%. In the face
of that kind of broad-based gain, you may be tempted to keep the gas pedal to
the floor and go for more. The only problem with this strategy is that stocks
never go up in a straight line, and that means we are liable to see a pullback
soon that could put the brakes on your trading. Yet there is a way to make sure
you dont fall victim to being too bullish here, and that way involves using
various exchange-traded funds (ETFs) to diversify your portfolio. The beauty of
ETFs is that they allow you to gain exposure to a variety of market sectors via
one low cost (i.e., low expense ratio) basket of securities pegged to a
particular index. For example, lets say you still remain bullish on stocks but
you didnt know precisely which individual stocks you want to trade? In that
case, you could buy an ETF such as the SPDR S&P 500 (NYSE: SPY ), an ETF pegged
to the fortunes of the S&P 500. The Spiders, as they are known, have been around
for a long time, but now theres a host of other ETFs that allow you to truly
diversify your portfolio not just in the number of stocks you own, but in the
sectors of the market you own. One traditional way to diversify a stock
portfolio is to own bonds, and that can be done easily with an ETF such as the
iShares 20+ Year Treasury Bond Fund (NYSE: TLT ), a fund that gives you exposure
to the long end of the U.S. Treasury market. Another way to diversify your
trading portfolio, as well as a great way to hedge to the falling U.S. dollar,
is via commodity ETFs pegged to the precious metals segment. For example, the
SPDR Gold Shares (NYSE: GLD ) is an ETF that allows you easy access to the spot
price of gold, while the iShares Silver Trust (NYSE: SLV ) gives you exposure to
the spot price of silver. Both of these trades have been screaming winners of
late, and thats given traders with a diversified portfolio an extra leg up on
profits. In addition to precious metals funds, there are many other commodity
ETFs that allow you to even further diversify your stock trading portfolio. One
of the biggest is the PowerShares DB Commodity Index Tracking (NYSE: DBC ), an
ETF thats pegged to the Deutsche Bank Liquid Commodity Index. The index consists
of light, sweet crude oil, heating oil, gasoline, natural gas, Brent crude,
gold, silver, aluminum, zinc, copper, corn, wheat, soybeans and even sugar.
Basically, youre getting the most diverse basket of commodities out there all in
one easy-to-own ETF. If youre looking for ways to diversify your trading
portfolio, then the ETFs mentioned here represent a very solid start. For more
trades, ideas and strategies, visit Traders Reserve .