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.

There are many types of ETFs that track many different markets. There are ETFs that track the Dow Industrials and the NASDAQ. Some track specific sectors, like technology. Others track the markets of foreign countries. And some even track commodities, like gold or oil. So when it comes to variety, ETFs can match mutual funds. It is safe to say that an ETF is usually a better choice over a mutual fund tracking the same market.

There are still some advantages to standard collective investments. If you wish to find a fund, which will outperform other similar ones, you have to find one whose fund manager can exercise some creative discretion when choosing it’s underlying investments. Generally that option is limited to mutual funds. ETFs tend to automatically track certain market indices whose components are pre-specified.

Another reason you might pick a mutual fund over an ETF is when making long-term investments in a commodity. Since commodity-tracking ETFs must invest in futures contracts, there are a lot of expenses involved with turning those future contracts over. This can cause a ETF to underperform the index it is tracking. So for long-term investments, it might be better to find an asset which follows commodities surrounding business market, rather than and ETF which invests in the commodity itself.

Also, as an employee, your company’s retirement plan might not allow for investing in ETFs. In that case, you’ll need to select some mutual funds that meet your needs.

However, generally speaking, if ETFs are available, they are the better choice. And if you intend to trade in the shorter term, there is no contest. Simply the ability to enter stop-loss orders to sell ETFs in the middle of a market day can add to your peace of mind. Several large mid-day crashes have occurred in the past several years, and it is not easy watching the market go lower and lower knowing that you will not be able to get out of your investment until the day’s end, when who knows how far it will have fallen.

For more information on mutual funds, visit http://largestfund.com.

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Old habits die hard. They always do. Especially when it comes to money and investing. We tend to spend the way we’ve always spent and invest the way we’ve always invested.

Take gold and silver. Here are investments whose time has clearly come. All the signs point to it. All the stars seem aligned for it. Whether it’s hyperinflation knocking on our doors, politicians spending like last month’s mega-lottery winners, or socialism trying, once again, to take down democracy, there has never been a smarter time to own precious metals.

But just when victory is well within our grasp and a precious metal investment seems like the simplest thing to do, those old habits kick in and, well, we blow it.

Blame it on the “paper mindset” many American investors are burdened with. To those of us so afflicted, it isn’t an investment unless it comes denominated in paper or digits, not worthy of our consideration unless it can be folded or stored in someone’s computer. So it is that when these sadly biased people correctly identify the exciting opportunities in store for gold and silver, they almost always and incorrectly think in terms of paper versions of these precious metals.

They think of ETFs.

Why some folks are born with this aversion to literal investments-things with actual value as opposed to the mere representation of value-is anybody’s guess. In this case, these investors prefer ETFs versus, say, a hefty $20 St. Gaudens Double Eagle or nicely toned Morgan silver dollar ostensibly because of the safety and convenience.

Safety and convenience. As it turns out, that’s pretty ironic.

Striking a Paper Investor’s Fancy

Gold and silver ETFs-gold and silver exchange-traded funds-were created, according to Wikipedia.com, “to give financial institutions and private investors the ability to own [precious metals] and gain exposure to the price, without the inconvenience of storing physical bars or opening a futures trading account.” ETFs are traded on exchanges around the globe, including the New York Stock Exchange, providing an acceptable, even trendy way for paper investors to stock up on hard assets.

How nice. Soon other companies went a step further in the direction of alleged security by developing physical gold and silver ETFs, funds backed by “uniquely identified” precious metal bars.

Sounds great, doesn’t it? Pretty foolproof? And it is…unless, apparently, you actually have to account for the gold and silver in these funds.

What’s a Silver Bar or Two Between Friends?

Enter Project Mayhem Research. This is the company that developed a computer program to conduct data mining on the inventory of publicly available silver ETFs

The company published its latest findings at the end of July, and what these researchers found was pretty heartbreaking. Of the inventory of numbered silver bars held by two well-known ETFs, Project Mayhem Research uncovered “internal duplicates, rough internal duplicates, weight duplicates, statistical clustering, and cross-reference duplicates.”

Put another way, the people at these funds just didn’t have all the silver they claimed.

Project Mayhem Research concluded with this: “In our opinions, the only way for all of these anomalies to occur together, as noted in this paper, is via systemic fraud or gross accounting error bordering on jaw-dropping incompetence.”

Yikes. Not exactly a ringing endorsement of the precious metal ETF trade.

Ain’t Nothing Like the Real Thing

All of which underlines an important principle in hard asset investing: Actually own the hard asset!

There have been countless variations of the “you can trust me” gold and silver fraud, schemes where supposedly your precious metal is stored at a secure, high-tech vault located inside the remote granite mountain of a politically stable country and audited each and every day by a trusted three-letter governmental agency, or something along those lines. Sadly, it now looks like you can number some ETFs among these creative scammers. Remember, for a legitimate ETF to actually work would take something even rarer than gold:

It would take integrity.

Not that actually owning and storing gold and silver yourself is the incomprehensible and inconvenient task it’s made out to be. That’s laughable misinformation. Here’s how easy it is: You go to the same bank you now trust for your dad-to-day finances and ask if you can rent one of their safety deposit boxes; they rent you one for next to nothing; you put your precious metals inside your box and close it; they shut and lock those big vault doors behind you; you wipe your hands and head to your car (maybe grabbing a bank lollipop along the way) and, really, that’s about it.

Or, if you’re more adventurous, there are an almost infinite number of ways of keeping gold and silver hidden and secure within the safe confines of your home. It might even be kind of a fun project to take on.

Either way, it’s a tremendously smart move to own some precious metals in the economic and geopolitical mess we now find ourselves in. Just be sure to trust the one person in the world you know you can trust.

Yourself.

Kevin DeMeritt, President of Lear Capital, is a published author, analyst and expert guest on more than 1000 radio programs, including Rush Limbaugh and Coast to Coast with George Noory, discussing today’s economy, gold and the geopolitical picture. Now more than ever, his insights are welcome by nervous investors. Visit http://www.LearCapital.com for all the investing help you need.

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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.

Finally the regulators have woken up to this and the Financial Industry Regulatory Authority (FINRA) has issued a regulatory ruling in which it warns of the risks of these funds. FINRA is an independent regulatory organization empowered by the federal government to ensure that America’s 90 million investors are protected, and it noted that financial advisors have a fiduciary obligation with regards to the marketing, suitability, and understanding of leveraged ETFs.

FINRAs words should be heeded by anyone considering leveraged ETFs:

“While the customer-specific suitability analysis depends on the investor’s particular circumstances, inverse and leveraged ETFs typically are not suitable for retail investors who plan to hold them for more than one trading session, particularly in volatile markets.”

Parker Franklin is no ETF analyst but he’s smart enough to recognize that leveraged ETFs can be dangerous, as reported here: http://hubpages.com/hub/ETF-Analyst-Leveraged-ETFs-are-Toxic

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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.

A senior Irda official said the regulator is weighing the two options. “We may allow insurance companies to invest in gold and equity ETFs with a cap of 5-10%. There are proposals from various companies to let them invest in ETFs of commodities and equities,” said the official.

An exchange-traded fund is an investment fund traded on stock exchanges just like stocks. Gold ETFs invest directly in gold and hence track its prices closely, eliminating the hassles of stocking up on physical gold. Equity ETF mirrors a basket of stocks such as S&P CNX Nifty or BSE Sensex, which reflects the composition of an index.

The Irda official said the regulator would, however, like to control the exposure of insurers to any single commodity.

After the regulatory changes in the Ulip space, insurance companies are not able to innovate products. “The charges are capped. There is not much modernism that we can bring. One product is replicating another,” said a senior executive of a large insurance company.

Insurance companies are looking forward to new options for investment flexibility. “This will recover our investment choice. Whenever there is an inflow in Ulips, we can quickly allocate funds in ETFs and then take a call on where to invest,” said Abhijit Gulanikar, chief investment officer of SBI Life .

There are 16 ETFs in India, including gold and equity. According to the current regulations, insurance companies cannot invest in commodities. These changes will, however, require amendments in regulations. After the Insurance Act is amended, Irda will have the power to introduce changes in the investment norms.

Source: [Economic Times]

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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.

For example, if one wanted to take a bearish position on the AUD relative to the USD, then you could to do so via an Australian Dollar CurrencyShare ETF which trades with ticker code FXA. The CurrencyShares Australian Dollar Trust is designed to track the price of the Australian Dollar net of Trust expenses, which are expected to be paid from interest earned on the deposited Australian Dollars. it provides a complete list of forex ETFs.

Various bearish strategies are:-

1. Short the underlying
2. Long put
3. Bear call spread
4. Bear put spread
5. Ratio put spread
6. Put time spread

The basic component of most bearish options strategies are put options. Put options changed the way traders profit when a stock goes down as there is no need to sell short, which resulted in a margin requirement. Previously, profiting when a stock dropped in price only happened when you short sold the stock itself. When shorting, margin is held to cover any potential risk with an adverse price move.

In summary currency ETFs are used to gain exposure to the world’s largest financial market – the forex market. If a trader is looking to take a speculative or hedged position on a currency, one can do so using a currency ETF.

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ETFFunds.com.au is a website dedicated to exchange traded funds. Whether you’re an individual investor interested in learning about ETFs or a financial advisor using ETFs, the ETF Fund website will have the answer.

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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

Leveraged ETFs can also increase in value in a falling market. Such an ETF is called an inverse ETF and can also be leveraged which would offer multiple positive return if an index declines in value.

There is a lot of controversy surrounding leveraged ETFs. Higher risk, borrowing issues, tracking errors, and even issues surrounding the short and long term performance results. Contrary to popular belief, leveraged ETFs are constructed to create a multiple return on the daily performance of the underlying index and not in any other time frame. For example with a 2x leveraged ETF, the simple concept is that if the index rises 1%, the leveraged ETF should create a 2% return on a daily time frame, not a weekly or any other time frame.

Leveraged ETFs are designed to include the securities in the underlying index, but also include derivatives of the securities and the index itself. These derivatives include, but are not limited to, options, forward contracts, swaps and futures.

In summary leveraged ETFs are fast-becoming one of the most popular types of ETFs. And whilst they are an aggressive new ETF innovation, they are also very controversial. There are other issues such as tracking errors, borrowing complexities and other constraints.

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www.etffunds.com.au is a website dedicated to ETFs. Whether you’re an individual investor interested in learning about ETFs or a financial advisor using ETFs for high networth clients the ETF Fund website will have the answer.

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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.

The key advantages of ETF’s over stocks and Mutual Funds are:

* ETFs Have Lower Expense Ratios:

Though the differences between the average expense ratios of ETFs, index funds, and actively managed mutual funds might seem small, over time they affect returns (profits) substantially

* Have No Minimum Investment Requirements

* Provide More Trading Flexibility

* Offer Tax Advantages

Lower taxes than actively managed funds

Deferred tax bills

* Reduce the Risk of Fraud

They are generally more transparent than mutual funds.

* They Offer Options and Short Selling

* Have Lower Volatility Than Individual Stocks

* Are Less Risky Than Individual Stocks

* Make Asset Allocation Easy

For instance, if you decide that your portfolio should contain 60% stocks, 30% bonds, and 10% commodities, you can buy just three ETFs that track separate stock, bond, and commodities indexes

* Make Diversification Easy and Affordable

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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.

Shares of ETFs are bought and sold on the market floor, just like an individual stock. But, the items in the ETF portfolio will include a number of different assets. In the open ended ETF, daily profits are automatically reinvested. Share holders receive cash dividends on a quarterly basis.

UITs might be diversified, but they might not. Nothing is done automatically. A management team makes the decisions. The payment of dividends varies. In other words, there are fewer rules.

A grantor trust ETF is more like a standard stock holding. You have a shareholder’s vote and all dividends are paid to you, rather than reinvested.

Most investors are accustomed to making money by buying low and selling high or holding a position for many years and expecting to earn an average of 10% per year. Of course, that didn’t happen in recent years. Many investors lost money. But, historically, that’s what long-term investors have expected.

There is one kind of ETF that does not depend on the value of the stock increasing over time. It is referred to as an “Inverse ETF”. Investing in an inverse ETF means that you profit from a decline in the value of an underlying benchmark, such as the NASDAQ. Two of the inverse ETFs are the NASDAQ 100 and the Russell 2000.

The term “smart” or “intelligent” ETF is sometimes used to refer to funds that are actively managed. The holdings within the fund may be based on a broad index fund, such as the S&P 500, but the management team has the freedom to change the amounts of certain stocks held within the fund or exclude some all together.

Other terms that may be seen alongside the ETF refer to the type of security held within the fund. For example, there are silver, commodity, oil, bond, China, energy, EURO and many other types of ETFs.

Analysts have different ideas about how to pick a truly intelligent ETF, one that earns over the short and long term. The best advice is to be sure that the fund is not too heavily invested in any one area. Diversification is always the smartest choice.

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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.

We cannot expect the US to grow and innovate on the scale seen in the past. For portfolio growth, emerging markets are the best bet. Look for nations where factories are being built and most of the populace is poor. Industrializing countries where much of the citizenry are rural and looking for opportunity in the cities are where we need to invest. Resource rich nations are also a good bet.

MSCI Barra identifies 22 countries as emerging markets. Some of the countries identified have been growth engines for some time, such as China. Better growth opportunities may exist in countries like India, Colombia, Peru and Indonesia. With the exception of India, these countries have been overlooked, and all are growing much faster than the US. So make sure that you have some exposure to these emerging markets, or you will miss out on some of the world’s economic growth.

Diversification is the only free lunch offered to investors. If you take all of the different possible asset classes, and allocate your funds between them, you have a diversified portfolio that is insured against everything except global economic risk. You must look outside the US to achieve this diversification. For a passive allocation to stocks, the best bet is to allocate to all portions of the world, such as the Vanguard Total Stock Market Index, in mutual fund form or under the ETF ticker VTI. The Vanguard Emerging Market ETF is VWO, which only charges 20bps of annual fees.

US stocks and bonds are only the beginning of your investment journey. For the best returns, follow the fastest growing economies.

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