Individual investors no longer have to wait on Wall Street’s products to address specific areas of interest. Low cost brokers and basket trading (the ability to trade, manage and track a group of stocks as one entity) have made it financially feasible and practical to create your own “pseudo-ETF.”
What are the advantages of basket trading?
• Personalized investment criteria – create baskets of stocks that fit your criteria or investment needs. For example, create baskets by sector, investment style, market capitalization, life event, your goals, etc.
• Automated allocation – the automated allocation of basket trading allows you to quickly assign an equal dollar amount or number of shares to each security you want to purchase.
• Place trades at once – with one order buy or sell entire basket.
• Total control – buy and sell securities from your basket at your discretion. Control the timing and tax implications of your basket transactions.
I have used basket trading to capitalize on trends such as the industrialization of Brazil, Russia, India and China (collective known as BRIC) – before BRIC ETFs were available. Basket trading expenses when using discount brokers such as FolioFn, Interactive Brokers and ShareBuilder are comparable to ETFs. Check with your broker to see if they support basket trading.