Skip to comments.What Are ETFs? (Exchange traded funds)
Posted on 01/11/2014 2:07:27 PM PST by RoosterRedux
What Are ETFs?
In the simplest terms, Exchange Traded Funds (ETFs) are funds that track indexes like the NASDAQ-100 Index, S&P 500, Dow Jones, etc. When you buy shares of an ETF, you are buying shares of a portfolio that tracks the yield and return of its native index. The main difference between ETFs and other types of index funds is that ETFs don't try to outperform their corresponding index, but simply replicate its performance. They don't try to beat the market, they try to be the market.
ETFs have been around since the early 1980s, but they've come into their own within the past 10 years.
ETFs combine the range of a diversified portfolio with the simplicity of trading a single stock. Investors can purchase ETF shares on margin, short sell shares, or hold for the long term.
Long-Term Growth of ETFs
It was in the late 1970s that investors and market watchers noticed a trend involving market indexes - the major indexes were consistently outperforming actively managed portfolio funds. In essence, according to these figures, market indexes make better investments than managed funds, and a buy-and-hold strategy is the best strategy to reap the advantages of investing in index growth.
(Excerpt) Read more at nasdaq.com ...
ETF's are cheaper than mutual funds (no load and low on-going fees), may be traded instantly, and permit the investor to target market indices, market segments, commodities, countries, etc with great ease.
Extra Terrestrial Faggots. They invented the anal probe and are masters at cattle mutilation.
Steer clear of them, they can do you no good.
Most if not all brokerage firms (I use Schwab) have online ETF screeners.
Whenever I find a stock I like, I first find out which ETF's contain it and how they are performing.
ETF's really give individual investors a leg up.
Nothing as helpful as the voice of personal experience.;-)
Agree, ETFs are another way to invest. I’ve got a bit in TBT on the assumption interest rates will be going up.
If I remember correct, they also trade "intra-day" meaning the price fluctuates via bid / ask vs. Mutual Funds closing @ a NAV @ the end of the day. Also If I remember correct you can put a "Stop Loss Order" on them as a way to prevent losses on the way down. So imagine in Sept 08' you were sitting on some gains and decided on a Stop Loss, you might have gotten out @ your sell price before the bottom fell out.
An EFT is highly artificial in many ways.
When you buy an EFT, you are basically relying on the EFT sponsor to do what he said he would do. For example, in a physical gold EFT, if shares are sold, then the sponsor is supposed to use that money to buy gold. Same thing with stocks and other underlying securities.
Now suppose there was another financial crisis, and the big financial houses that sponsor these things desperately need cash. Isn’t it possible that some of them might raid whatever money is available?
“Extra Terrestrial Faggots. They invented the anal probe and are masters at cattle mutilation.”
Dude, lay off the South Park.
But note that "stop loss orders" become market orders when triggered and that means, of course, not that they will be liquidated/executed at the trigger price, but they will be executed at market. In a falling market, a large group of market sell orders can drive a market in deep loss territory...and you don't want to sell there.
It has been said that this was the reason for the great depth of the crash of 2008. A lot of trading programs (computer algorithms) had "stop loss orders" which when triggered caused the entire market to race to the bottom in an effort to trade out.
Can an unscrupulous sponsor pull a Madoff? Well Madoff did and so did so did Jon Corzine.
But they are the great exception. Furthermore, there is nothing to stop a mutual fund manager from pulling the same stunt...or a corporate management team like that at Enron.
Actually, no. An EFT is not artificial.
You might be thinking of ETN's (Notes) wherein there is an institutional guarantor. Also, some leveraged ETF's might contain swaps and corporate guarantees...which is why I would avoid them.
This all said, I am not giving advice and none should be taken.
I'm not so sure about that. I believe computer trading is suspended after the market drops by a certain margin to avoid this very scenario.
I think the funds offer a good balancing mechanism for those who aren’t confident enough to own single stocks. Basically you’re paying the fun manager to do the homework and make the right choices and find the best mix.
What keeps me up at night are the doomsday scenarios, which a person can afford to neither ignore or bank on. The stop loss is probably the best protection, as long as the trigger is set to where you don’t incur losses on normal fluctuations but tight enough to guard against catastrophe. Of course finding that point is the tricky part...
“Exchange Traded Funds (ETFs)”
“ETFs? (Electronically traded funds)”
Any article that cannot use the same definition is suspect as junk.
That’s my fault...just finished a large Italian dinner and had a bad case of carbohydrate hangover. I will ask the mods to correct the title.
That scene with supposed stock traders moving around frantically on the trading floors is theatre.
That said, suspension still is triggered by a big percentage loss and the losses of 2008 and 2009 still occurred despite the use of trading suspensions, halts, and stops.
” Also If I remember correct you can put a “Stop Loss Order” on them as a way to prevent losses on the way down. So imagine in Sept 08’ you were sitting on some gains and decided on a Stop Loss, you might have gotten out @ your sell price before the bottom fell out. “
You can get killed on a stop-loss order. Suppose you had a stock trading at 50 with a SL at 45.
On a rumor it opens the next day at 20. Your SL sells it at 20.
Rumor is falsified and stock returns to 50. You are out 30 points.
Exactly. That's why I suspect the big losses occurred due to something other than electronic trading.
From what I understand, a big factor in the stock market crash of 2008 was that large institutional investors with a lot of real estate and/or mortgage-backed securities in their portfolios were forced to sell off their stock market holdings in order to make up for losses in their other assets.