ETF Frequently Asked Questions
> Can you buy ETF’s for the same price as stocks?
Exchange-traded funds (ETFs) are innovative investment vehicles. They are built like mutual funds and trade like stocks. Investors can access all types of stocks and strategies through ETFs. This is beneficial for many investors, especially those with smaller portfolios.
> A lot of ETF’s do not beat the S+P 500?
ETF’s come in all flavors and they track all kinds of things. You can’t expect an ETF that tracks precious metals to duplicate the S&P 500. Only ETF’s that track the S&P 500 are guaranteed to do same as the S&P 500 (leveraged ETF’s will always do even better than the S&P 500).
>The best ETF’s I’ve heard are the one’s that are actively managed. By themselves a lot of them don’t outperform the S&P 500.
I tried one of those actively managed ones and at $290 a trade for commission, I quickly realized the broker was making most of my profits.
Yes, you don’t want to really BUY & HOLD ETF. Example, the S&P 500 went up around 14% for 2012. A 3X ETF tied to the S&P 500 (UPRO is one) should return around 42%.
Go to Yahoo and do a historical search and you will find UPRO closed 2011 at 60.12 and finished 2012 at $88.25 for a 46.8% gain.
Now on the flip side, if you don’t just buy and hold, but be in UPRO when my Market Timing Indicator (MTI) says the markets will go up, and be in SPXU when the MTI says the S&P is going down, you end up with a around 110% gain instead of 47% with buy and hold.
So managing is better if you know what you are doing. And YES YES and YES, market timing is the key! The pros say you can’t do it, but I think my numbers show otherwise.
> There are more ETF’s everyday, how do you determine which ones?
My criteria consists of two things:
1) something I can easily monitor at most any time of the day, whether I’m home or not.
2) something that has the potential to make big gains.
So what is it that you hear about every day in the news on TV or on the radio? What the S&P, NASDAQ or the DOW did today.
So that is what I want to invest in. Turn on any radio and when you hear, “The S&P lost 1% today”. I instantly know that I’m either up 3% or down 3% depending if I had the right ETF or not.
I could easily have chosen Nasdaq or DOW, but the S&P is more broad based so I went with it.
Now that you know what you want to be in, now it’s time to find an ETF. So using #2 in my criteria, I want a 3x ETF for the most bang. So now I just look and see which ETF’s are 3x on the S&P 500 (Google it). Up comes a list of companies that offer that ETF. Those who want less risk can go with a 2x or 1x ETF. Also take a look at volume. Go with those that have a lot of volume.
CLICK HERE for more details on how you can start trading ETF’s today!
