That's right - the institutional traders have gotten a hold of something that they know is the "new mutual fund" without the high fees.
The number of ETFs available to U.S. investors has exploded in the last five years.
Note: The graph to the left only extends to 2009 - needless to say - total Global ETF growth is now "off-the-charts"!
There's good reason for it, too:
The ETF format simply works better than mutual funds for just about everyone. Long-term buy-and-hold investors like ETFs for their low cost, while traders appreciate their liquidity.
The best thing is that ETF's performance is not tied to how well or poorly the stock market, individual stocks or oil is doing.
Here is small condensed list of the benefits of trading ETFs:
Mirror indexes or sectors without having to buy hundreds of stocks.
Lower expense ratios. While mutual funds can charge 1% to 3%, or more, ETFs are almost always in the 0.1% to 1% range. Over the long term, these cost differences can compound into a noticeable difference.
Unlike mutual funds ETFs trade intraday like individual stocks. For instance, you can sell short, use a limit order, use a stop-loss order to buy on margin, and invest as much or as little money as you wish (there is no minimum investment requirement).
Diversification. This is one of the keys to long term investing success.*
Tax Benefits. Pay lower taxes than most mutual funds:
Investors redeem ETF shares by selling them to other investors not by selling them back to the fund. As a result, ETFs don’t have to sell their holdings to satisfy redemptions. This generally keeps capital gains low. And, since most ETFs track indexes, they tend to have low turnover, further reducing capital gains.
*This is how ETF's mirror sectors:
The Oil services sector (like all sectors) is comprised of dozens of individual oil stocks. If you were to try to copy the performance of the entire sector, you would have to be wealthy enough to buy each and every oil stock in the oil sector - not many investors can do this.
You would also need to have the time and experience to research each stock in order to avoid a disaster such as having one or two of the companies collapse, which would do extreme damage to your portfolio!
You can now just buy an oil sector ETF and you can enjoy the benefits of incredible diversification without the risk of one or two "bad apples" hurting your overall holdings.
Having the ability to easily trade sectors in one of the biggest benefits of the new generation of Exchange Traded Funds, however having access to this "state-of-the-art" investing vehicle does not automatically make you a successful investor.
You must be able to understand and follow price action - price always includes all fundamental knowledge - once you can read the charts, you can time all of your stock and commodity options as well as ETF trades so that you can consistently maximize profits!!!
ETF's are absolutely the new investment vehicle of the next decade and beyond.
The big fund managers have been using ETF's since their inception and it is in their personal interest to keep the public "in-the-dark" as far as the ETF's availability and the incredible positive effect they can have on your portfolio!
For More Details, Please Visit:
Linked-In: http://www.linkedin.com/in/ericzuckerman1
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