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Updated: Feb 4
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In a period of market 'craziness' where stocks are up one day and down the next due to Washington politics during the second half of 2011, many investors are afraid. ETFs are an alternative form of stocks.
An ETF (Exchange-Traded Fund) is a securities fund which tracks a certain sector of a stock market index. Indices such as the S&P 500 and FTSE are examples of funds which can be traded on an exchange like a stock or share.
ETFs can be chosen by market sector or country or include broad-market indexes. This diversification offers protection in volatile markets, such as commodities. There are ETFs for gold, silver, oil etc.
Exchange Traded Funds (ETFs) represent a basket of securities
that are traded on an exchange. They are similar to index mutual
funds but are traded as stock. As with all investment
products, exchange traded funds have some advantages as well as
disadvantages.
The Portfolio Prophet is a brand new trade alert software and home study course program to be released in March 2011 targeted at portfolio traders & investors using ETFs as the basis for safely growing and protecting their portfolio. Conservative, Moderate, Aggressive, and Custom Portfolios tell the trader exactly what mix of ETFs to trade - when to get in, when to change stop orders, and when to get out – with about 10 minutes work per week.
You really need to watch this video with commentary by Bill Poulos made at the end of October 2011. It shows just how you can make money with ETFs.
Visit the website or watch the videos:
Definition of an
Exchange-Traded Fund
An ETF is rather like a mutual fund in that it can be
traded as a single stock. Like an index fund, such as the
S&P500, an ETF also represents a
'basket' of stocks. However, an ETF isn't a mutual fund
which has its NAV or net-asset value calculated at
the end of each trading day. An ETF's value fluctuates during
the trading day like any other stock, reacting to supply and
demand.
While ETFs attempt to mirror the return on indexes, they do not follow them exactly. There is typically a 1% or more disparity between the return of an ETF compared to year-end return of the actual index, and in some cases it can be a lot more.
For example, here is a chart showing the past performance of two Gold ETF's (GDX and GLD), compared to the S&P 500 index (^GSPC) for the same period. Some ETFs pay dividends too. The spot gold price rose dramatically in 2008 to over $1,000 per ounce before fluctuating with the current financial turmoil affecting markets world wide. Note that gold bullion ownership is possible with a company like BullionVault. Learn more on our Bullion Page. However, while GLD and SLV are within the scope of a 401(k) or IRA, purchasing and storing physical metals are not.
Attend a monthly FREE ETF WEBINAR (no credit card required) and learn how to achieve at least 5.7% per month return, ETF 'trend trading' for no more than 10 minutes per evening:
Costs of Trading
Exchange-Traded or Mutual Funds
ETF investors
receive the benefits of both diversification of an index fund
together with the flexibility of a stock. For example
ETFs can be bought on margin in single 'share' quantities and
also short sold. Also, the expense
ratios of most ETFs are lower than those of a typical mutual
fund, as the broker commission on trading ETFs
is the same as for buying and selling regular stocks.
Types of ETF
Exchange-traded fund trading began in 1993 with the
introduction to the American Stock Exchange (AMEX) of the S&P 500
Index Fund. The SPDR ticker symbol gave rise to the
nickname of Spider.
Today - tracking a wide variety of sector-specific,
country-specific and broad-market indexes - there are hundreds
of ETFs trading on the open market.
Regular stock traders have a daunting task in choosing and
analysing which sectors are performing and which stocks to buy.
This is one reason that Exchange-Traded Funds suits some traders
more, but as with other types of investment, some
ETF training is
required to get the best out of this market.
For example, if the Austrian
market sector is your thing, there is the iShares (Barclays) MSCI Austrian
Index fund (EWO). Someone interested in the
healthcare sector might buy into Vanguard’s Health Care Viper (VHT)
and Merrill Lynch’s HOLDRs (IIH0) could be the instrument
for a potential investor in the internet infrastructure sector.
Popular ETFs have nicknames like cubes (QQQQ),
vipers (VIPERs) and diamonds (DIAs). All funds are
'passively
managed' which means that investors pay much less management fees
than say for mutual funds.
Some Popular
Exchange-Traded Funds
SPDRs, usually referred to as
Spiders, allow an investor own shares in the famous
S&P (Standard
& Poor's) 500. This is the 'benchmark' index of the
500 most widely held and traded stocks on the New York Stock
Exchange. Buying Spiders allows an individual trader to invest
in a selection of these stocks, according to personal
preference, choosing groups such as Technology, Financials,
Healthcare, Industrials, Energy, Materials, Utilities, Consumer
Staples and more.
QQQQs are known as Cubes.
This is an ETF which tracks stocks represented on the Nasdaq-100 Index, the
100 largest and most actively traded non-financial stocks on the
Nasdaq.
Cubes offer broad exposure to the long term prospects of the technical sector. If
one tech company falls short of projected earnings, its shares
may be hit hard, but the sector's performance as a whole may
absorb this.
iShares is Barclays' ETF (Barclay’s Global Investors
or BGI). There are over 120 iShares trading on
ten or more stock exchanges. Barclays has introduced technology-oriented iShares that follow
the Goldman
Sachs indexes. These ETFs trade
on the AMEX.
DIAMONDs (DIA) are Diamonds Trust Series I, and track the
Dow Jones
Industrial Average (DJIA). This fund is structured as a unit investment
trust which trades on the AMEX.
There are of course many more US,
UK, Europe and other regions with Exchange-Traded Funds open to the
private investor and the whole topic
of ETFs needs to be studied and understood.
ETF Home Study Course
for ETF Trend Trading
Soon to be available is an
ETF Trend Trading System
- a comprehensive
home study
course for ETF investing, consisting of training, software,
signals service and support from one of the leading stock
trading and forex master trader and trainer with best selling programs and
courses.
This will make the whole business of
Exchange-Traded Funds
not only easy to understand but it will teach you how best to
profit from
investing in this type of stock and become a successful
exchange fund
trader.