Bear markets can play havoc with mutual fund holdings. An alternative is to adopt a trading methodology that removes capital as trends breakdown, then re-inserts that capital into the market as a favorable trend re-emerges. Bill Poul’s has compiled such a method in his ETF Profit Driver course. Based on a study conducted a few years back, about 10% of all long-term mutual-fund assets were held in index funds. Those funds offer comparatively low fees track indexes familiar to most investors.
The drawback of index fund investing has been holding those positions during market downturns. In the past several years Exchange Traded Funds have started opening up significant new investment strategies. While ETF’s behave much like traditional index mutual funds, they have key differences. Two significant features differentiating Exchange Traded Funds from mutual funds is the fact ETF’s are traded on exchanges. Mutual fund positions are only opened and closed at the end of the trading day, while you will be able to quickly enter or exit an ETF position at any time during market hours. Many Exchange Traded Funds also have highly liquid options chains further expanding their flexible use in your portfolio. As a result of this expansion of Exchange Traded Funds, small investors are gaining access to a growing array of different exchange-traded index products. Each year, numerous new ETF’s are launched, tracking everything from clean-energy stocks to the nanotechnology industry. A key driver in the popularity of these funds is the failure by many mutual-fund managers to beat the market for extended periods of time, even as they collect big management fees. Instead, many advisers have turned to a strategy of lower-cost index funds, and increasingly, Exchange Traded Funds. Fore more details, please visit our site http://ExpertOptionTrading.com.
Since their introduction in 1993, Exchange-Traded Funds (ETFs) have steadily taken market share from index-based mutual funds. Today they account for 40% of the index fund marketplace and show no signs of slowing down. These baskets of securities that passively track an index (in most cases) and trade throughout the day like stocks have profoundly impacted the investment industry. Active traders take advantage of the stock-like features of ETFs: limit order purchasing, shorting, and options. For the index investor, the low ongoing costs of ETFs represent an opportunity to squeeze greater returns from a buy-hold-rebalanced portfolio. It’s important to keep the ETF-mutual fund decision in perspective. Your choice of investment vehicle will have much less of an impact on your portfolio’s long-term performance than your ability to build and faithfully implement a risk-appropriate asset allocation plan. That being said, if you already have a long-term investment plan and you wish to maximize your chances of achieving your financial goals, this article can help you determine whether ETF investing is right for you.
The most glaring advantage of ETFs over mutual funds is their lower expense ratios. Comparing a popular basket of domestic and international index funds with their ETF counterparts, the ETFs have an average expense ratio advantage of .11% annually. This advantage obviously becomes more meaningful when a large initial investment grows undisturbed over several years. While ETF-like expense ratios are available through exclusive mutual fund share classes like Vanguard’s Admiral Class ($100,000 investment generally required), ETFs clearly have lower ongoing costs than most comparable mutual funds. ETFs are also more tax efficient than mutual funds. The process of creating and redeeming new shares “in-kind” allows most ETFs to unload low cost-basis shares and theoretically eliminate unwanted capital gains distributions.
Additionally, for tax loss harvesters, the vast number of ETF choices allows for efficient swapping of capital-losing funds for suitable alternatives. Finally, ETFs have a significant advantage in trading flexibility. Since ETFs are traded through brokers instead of fund companies, an investor can buy an ETF on any platform at any time of day. Daily holdings reports and up-to-the-minute estimates of underlying fund value (Intraday Indicative Value, or IIV) give ETF shoppers the transparency they need. Although trading costs must be considered, the fund minimums and redemption fees often associated with mutual funds do not apply to ETFs. Additionally, the ability to specify trading prices through limit orders can help to maintain a precise allocation.
Many private traders deem that options are thought to be traded by experts with good mathematical skill. There are two reasons why many private traders think so, that are. trading options are too risky and difficult. Many private traders think that it is easier to just trade stocks or futures. So, a simple question, if trading futures or buying stocks looks so much easier and less complex to do, then why options are available to be traded? The actual reason is that options, which are unlike other trading vehicle, can offer a trading edge to the private traders and allow them to cover almost any investment strategy and risk profile with flexibility. In many ways, options are the most superior trading vehicles that many traders use nowadays.
To trade options, you certainly do not need to be an expert in financing. In the book “The New Market Wizards” written by Jack Schwager, concludes that nobody can win without an edge, even you have the world greatest discipline and money management skill. If you trade futures on the All Ordinaries Share Price Index (SPI), you have to know exactly what is your trading edge; particularly, if you are a professional floor trader. With the trading edge, you should able to see the buy and sell orders that coming into the trading pit and also who is buyer and seller. Besides, the speed of execution of your orders and the transaction costs also should able to see. The popularity of the stocks, options and futures is increasing; therefore, many people trade these products. Only a small proportion of these traders apply a real trading edge. The main reasons for the unsuccessful of many private traders in the financial markets are due to the lack of a trading edge, poor risk management and insufficient capital.
The key point here is to find an edge, utilize it consistently and use the right risk and money management techniques. When the odds are in your favor, it is better that you learn how to trade options. It is also importantly when the odds are not in your favor, make sure you stand aside. You are doing yourself with the best possible chance of success if you doing so. Trading systems are as many as traders. We won’t trade a system if it doesn’t provide us with some sort of edge. If you have a system, which is able to give you an edge, why not further enhance your edge by expert option trading in a right circumstance. Before placing a trade, try to get as many factors that going in your favor as possible. By practicing this, you provide yourself with a much greater chance to success in the long run.