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There was a time when financial advisors all agreed on one thing: invest in no-load mutual funds. These days, however, you don’t hear much about those anymore but you do hear a lot about exchange-traded funds or ETFs. While mutual funds continue to be popular, they cannot match the growth in popularity of ETFs. What’s the difference between the two and why pick one over the other?

ETFs are like mutual funds in that they pool investment resources and usually spread them out over a variety of investments. ETFs, however, are designed to be traded like stocks. ETFs can be traded anytime the market is open and their prices will change during that time. Collective investment schemes are priced only at the end of the day and that is the only time they can be bought and sold. ETFs may be sold short and bought on margin; mutual funds cannot. ETFs have no management fees and usually have lower expenses too. Continue reading ‘Exchange Traded Funds Versus Mutual Funds’ »

Exchange-traded funds, or ETFs, are investments that hold a basket of securities like mutual and index funds, but they trade like stocks. This means that you can trade the ETF at any time of the day. This has the downside of incurring transaction costs each time you add to your ETF portfolio, whereas mutual funds are often set up to allow you to add funds for free. Other than this downside ETFs can be a good way to be bet on different classes of asset, like gold, or a sector such as oil, or even a country such as Japan. There a wide range of ETFs for you to choose from, but this article draws your attention to one of the most dangerous types – the leveraged ETF.

Leveraged ETFs return double or triple the returns of an underlying index, and there are also Inverse ETFs, which return two or three times the inverse of an index. However, since these ETFs have their exposure to an index reset on a daily basis their returns do not correlate to the index when they are held for longer than their typical compounding period which is a day. Any ETF analyst could tell you this, but most of the suckers on main street have no idea and end up holding the investments for an extended period. Continue reading ‘ETF Analyst – ETFs Can Kill Your Returns, Dead’ »

The Insurance Regulatory and Development Authority (Irda) is vetting a proposal to allow life insurance companies to spend in gold and exchange-traded funds, or ETFs. The move will provide greater flexibility to local insurers to invest in various asset classes.

Continue reading ‘Irda May Let Insurers Spend in Gold And Etfs’ »

The foreign exchange market is much larger than then equity markets although unlike equity (stock) options the currency option market is mainly Over The Counter (OTC). A global futures broker such as Enfinium International provides access to options on currency futures. However if your broker doesn’t support futures or options on futures you can still gain derivative exposure by trading options on currency exchange traded funds (ETFs), such as issued by Rydex CurrencyShares.

Continue reading ‘Trading Forex Options and Options On Currency ETFs’ »

An interesting development in the exchange traded fund (ETF) arena has been the creation of leveraged ETFs. A leveraged ETF is created to produce a 2x or 3x the return of its underlying index. Unlike normal ETFs which are designed to replicate and index or commodity, the leveraged ETF is designed to create exponential returns. Moreover, the goal of a standard ETF is not to outperform the correlating investment, but to give investors a beneficial way to mimic price. Leveraged ETFs provide a higher risk reward payoff. In contrast to standard ETFs a leveraged ETF does want to outperform the index or commodity they track. A leveraged ETF looks to provide 2 to 3 times the return of the underlying asset. So if the tracked index rises 1%, a 2x leveraged ETF wants to create a 2% ROI. You can obtain a list of leveraged ETFs from www.etffunds.com.au

Continue reading ‘The Truth About Leveraged Exchange Traded Funds (ETFs)’ »

ETFs are portfolios of stocks, bonds or in some cases other investments that trade on a stock exchange much the same as a regular stock does.

But, still, many active investors have been able to see opportunity in problems with the stock market. And one of the best ways to do that has been to use inverse ETFs, or ETFs that move opposite to market direction.

Starting just two years ago, the firm’s assets now exceed $20 Billion and make it the fifth largest ETF provider in America and the seventh largest in the world, and so far, in 2008, Proshares ranks second in growth among all U.S. ETF funds. They have 64 ETFs that offer short exposure and double exposure in a wide range of investment options including major indexes and major sectors like Oil and Gas, Financials, international and even Treasury Bonds. Continue reading ‘So What is the Big Deal With ETFs?’ »

There are many types of ETFs or “Exchange Traded Funds”. Let’s start with the three basics. These are exchange traded:

1. open end index mutual fund (passively managed)
2. unit investment trust, abbreviated UIT (actively managed)
3. guarantor trust

The term “exchange-traded” means that the funds are traded on the stock market. By contrast, shares of standard mutual funds are bought and sold through the company that manages the fund. Continue reading ‘What Types of ETFs Are There?’ »

Do you want the best returns for the long run? Go to where the growth is.

The financial community loves to talk about US stocks having a 7% real return, after it was popularized in Jeremy Seigel’s Stocks for the Long Run. This translates to 10-11% return before we take inflation into account. The problem with this is that it examines one very unusual subset of time where a country goes from a small fledgling nation to the largest economic empire on earth.

The dataset used by Seigel essentially uses the last 200 years of stock information, beginning in 1802. At that time, the US had admitted 16 states to the Union, and Thomas Jefferson had not even signed the Louisiana Purchase. During the next century and a half, we expanded across a continent and had only one major war on our home soil. America was the very definition of an emerging market. Continue reading ‘The Best Long Term ETFs and Mutual Funds’ »

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