We Weave Websites

Looking at all the exchange traded funds that have come on the market, it’s amazing. The Bond ETF is one that I’ve traded frequently over recent years, over the past 4 years the trading range is huge. For every great ETFin existance however, there is another one that sucks. The ones I avoid now are alot of the short and / or leveraged short funds because of performance lag. The inverse volatility etf XIV is one that I personally lost money in despite being right. The amateur investor can’t possibly make consistent money with these products. It’s puzzling why some of the highly leveraged ETF / ETN products haven’t met with more regulatory restrictions. Alright, enough of that but I encourage you to stick to good quality products that have proven to be successful. In general, unless you are trading for short term gains you should avoid the leveraged ETF products, physical storage of the commodity or investing in commodity based stocks are a much better way to go. It’s easy to see this by comparing USO (oil futures) to XOP which holds stocks of oil producers, the stock based version always wins over time. This leads to the conclusion that instead of investing in oil or natural gas you are better off in a fund that focuses on the related stocks. Generally, if you can’t find a physical commodity ETF for something, it means you should go with one that holds stocks of the producers. For stock index based investments it’s best to follow the same rule of thumb. It’s always best to make sure the ETF holdings match 100% with the ones found in the stock index it’s tracking, avoid the ones that use futures instead. If you look at the monster S&P 500 ETF (SPY) you will see that the correlation is almost perfect with the index. This really is however, just one in a sea of great options, the main thing is to do a little research. It’s best to compare the ETF directly to whatever it’s trying to mirror by using a historical chart. There’s no better way to judge a financial instrument than comparing to what it’s tracking. If there are periods of over and under performance, that’s something you want to know. Due to trading costs and administration fees it’s normal for ETFs to do slightly worse than the underlying over time. This is why it’s important to pay attention to management fees when looking at potential holdings. This is another reason the leveraged funds tend to lag badly as they tend to have much higher associated costs. By focusing on plain vanilla ETFs that minimize their expenses, avoid leveraging and have good past performance you can win at the investment game!