“If you don’t follow the stock market, you are missing some amazing drama.” – Mark Cuban
Every stockbroker in America is desperately hoping you won’t discover what I know.
And that is that Exchange Traded Funds (ETFs) shower investors with benefits that mutual funds simply can’t provide. They offer you virtually unlimited investment flexibility… and you can buy them without paying your stockbroker one penny in commissions.
ETFs have been around for more than 15 years. But although they’ve rapidly grown in popularity, most investors still don’t understand how they can be used to supercharge their portfolios in both up and down markets.
In a nutshell, an ETF is a basket of stocks that represents a sector.
For instance, the iShares U.S. Sector Health Care ETF has major holdings in companies like Johnson & Johnson, Merck, Abbott Laboratories, Amgen, Bristol-Meyers, and Eli Lilly. With one transaction, you invest in a pool of securities, just like with a mutual fund, but the basket trades like an individual stock.
The Wall Street Journal has called ETFs “one of the hottest investment tools to emerge in recent years.” And Money Magazine has said that “ETFs are one of the few financial products that actually make money for you instead of your broker.”
There are more than 800 ETFs, with new ones opening every day — and total assets invested in ETFs now top $800 billion!
ETFs offer you exposure to major indexes (like the Dow and S&P 500), or you can use them to invest in sectors like real estate, financials, bonds, commodities, foreign currencies, and even sub-indexes like solar, steel, or coal.
Plus, in recent years, “inverse” ETFs have been developed that give you the opportunity to make money when markets go down, while leveraged ETFs allow you to gain 2X and 3X exposure to various indexes and sectors.
You can even use ETFs in sophisticated options strategies.
How You Can Master Today’s Tough Markets
With its wild swings and the worst bear market since The Great Depression, it’s no secret that today’s stock market has challenged investors.
But that doesn’t mean you have to stick your money under the mattress.
You have other options.
Here are some recent real life examples from our Wall Street Sector Selector trading portfolios:
When the market was climbing in first quarter 2010, we triggered a “buy” signal on February 24 that lasted until March 22.
Our Standard Portfolio logged gains in ETFs like these:
EWW (iShares Mexico Index): +5.9%
XLY (SPDR Consumer Discretionary): +6.9%
XLI (SPDR Industrials): +6.8%
Then, on March 31, a “sell” signal fired and we and took up positions in ETFs that generated the following results:
PSQ (ProShares Short QQQQ): +7.7%
VXX (iPath S&P 500 VIX Short Term Futures): +50.3%
EFZ (ProShares Short MSCI EAFE – Europe, Africa, and Far East): +2.8%
During this same period, our 2X Leveraged Portfolio, focusing exclusively on leveraged ETFs, logged gains like +5.9% in EEV (ProShares Ultra Short Emerging Markets) while our Option Master Portfolio generated profits of +29.7% in less than three weeks and +10.8% in two trading days during the months of May and June.
Of course, not every trade is going to be a winner. And it takes discipline, and even courage, to compete successfully in today’s cutthroat markets.
However, it’s crystal clear that ETFs are extraordinarily powerful investment vehicles — and they should be a major part of every investor’s portfolio.
A Laser-Like Focus on Exchange Traded Funds
At Wall Street Sector Selector, we believe that ETFs are vastly superior to mutual funds, because:
- ETFs are far more cost-efficient than mutual funds. A typical mutual fund charges 1% or more annually, while ETFs average in the 0.10% to 0.6% range. The fees are lower, so your return automatically goes up.
- ETFs are far more tax-efficient than mutual funds. You only pay capital gains when you sell, unlike a mutual fund that is constantly rotating its underlying portfolio and giving your profits away in taxes.
- ETFs are far more liquid than mutual funds. They have no minimum holding period, no early redemption fees, and they trade during the day (like stocks), so you can open or close your position at any time.
- ETFs offer far more transparency than mutual funds. Anytime you want to know what your ETF is invested in, you can see its holdings — instead of wondering what your mutual fund manager is doing because he doesn’t have to report until the end of each quarter.
- ETFs let you invest in any sector in the world, be it domestic energy, the stock market in China, or the European equivalent of the S&P 500.
Wherever opportunity lies, ETFs allow you to exploit it.
Add up all these benefits, and it’s easy to see why we chose ETFs from top providers as the exclusive trading vehicle for Wall Street Sector Selector.
Everyday, we track more than 50 ETFs across more than 15 sectors.
Here’s a sample of the funds we track:
|iShares Emerging Markets
iShares MSCI Hong Kong Index
iShares MSCI Japan Index Fund
iShares MSCI Malaysia Index Fund
iShares MSCI Singapore Index Fund
iShares MSCI Taiwan Index Fund
iShares MSCI Mexico Index Fund
iShares MSCI South Korea Index Fund
iShares MSCI Brazil Index Fund
iShares Dow Jones U.S. Insurance Index F
iShares Dow Jones U.S. Utilities Sector
iShares Lehman 7-10 Year Tres. Bond Fund
iShares Dow Jones U.S. Oil & Gas Exploration
iShares Dow Jones U.S. Oil Equipment & Services
|iShares S&P Latin American 40 Index
iShares Dow Jones U.S. Aerospace & Defense
iShares Dow Jones U.S. Home Construction
iShares Dow Jones U.S. Consumer Cyclical
iShares Dow Jones U.S. Energy Sector
iShares Dow Jones U.S. Financial Sector
iShares Dow Jones U.S. Healthcare
iShares Dow Jones U.S. Industrial Sector
iShares Dow Jones U.S. Consumer Non-Cyclical
iShares Dow Jones U.S. Basic Materials
iShares Dow Jones U.S. Real Estate Index
iShares Dow Jones U.S. Transportation
iShares Dow Jones U.S. Tech Sector Index
iShares Dow Jones U.S. Telecom Sector
Get “Best in Class” ETFs Delivered Straight to Your Inbox
Wall Street Sector Selector rigorously screens the 50+ ETFs we track, and then selects the “best in class” that demonstrate the top opportunities for rapid fire gains in our Standard, 2X Leveraged, and Option Master Portfolios.
So now, instead of searching across a universe of thousands of stocks and mutual funds, you can laser-target your investments in a simple and reliable ETF trading program.
With the flexibility and diversification of ETFs, you can make today’s volatility work for you instead of against you — and have the chance to rack up profits whether the market is going up or down.
Make no mistake. Today’s markets are volatile and dangerous.
But every danger comes with an equal opportunity. And, starting today, you can take advantage of all these possibilities through the awesome flexibility and unstoppable power of Exchange Traded Funds.[Ed. Note: John Nyaradi is publisher of Wall Street Sector Selector, an online newsletter specializing in sector rotation trading techniques and Exchange Traded Funds. He is also president of Ridgeline Media Group, LLC, and publishes a financial blog, Wall Street Sector Selector: Professional ETF Trading. Nyaradi’s articles on investing have appeared in major online financial publications, including Dow Jones Market Watch, Trading Markets, The Money Show, Yahoo Finance, InvestorsInsight, Fidelity.com, Seeking Alpha, ETF Daily News, iStockAnalyst,and many others.He has also appeared as a guest on The Business Talk Radio Network.
And for other “under-the-radar” investing tips and tricks, as well as the most lucrative wealth building and wealth saving opportunities available today, check out Early to Rise’s Liberty Street League newsletter.]