Why Etfs investing
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When you come to the stock market you have several choices in selection of what to trade. If judge by trading volume we could say that among the main choices are stocks, currencies, exchange traded funds (ETFs), options and futures. By no going into a deeper discussion we may say the trading stocks and exchange traded funds has less leverage and respectfully it is less risky investments vehicles. Furthermore, these types are most used by simple and professional traders. Trading stocks and ETFs attracts all categories of investors: starting from an average Joe and finishing big banks and governments.
In nowadays Exchange traded funds is fast growing family of securities which invade with confidence each stock market sector, starting from indexes and finishing by ETFs on commodities (gold, silver, and etc), futures and even on volatility indexes (VXX fund is designed to track the performance of the S&P 500 options volatility index - VIX). If ten years ago volume traded on Etfs was relatively small, right now, we have such giants that are traded on the level of the most traded stocks. We still may see the dominance of the individual stocks on the market. Yet, the tendency is in the favor of the funds where trading volume is growing much faster. If we see continuation of this pattern we may say with high degree of confidence that in a couple of years the traded funds will dominate on the stock market. Below are several most important factors that attract most of the investors to the ETFs:
a) they could be traded just like stocks: you can buy and sell them during trading hours, you may trade them on margin, you may receive dividends, and etc;
b) they still are funds and by purchasing them you receive all benefit of the funds;
c) they cannot file bankruptcy and you may not lose all your investments. In opposite, by purchasing ETFs you receive stable investment vehicle that is already diversified;
d) there is no need in fundamental analysis that is recommended when you select stocks for trading. All fundamental analysis is already done by the sponsors of a fund. Therefore, a trader may solely focus all his/her attention on the elements of technical analysis;
c) the ETFs are highly liquid, you may easily sell and buy them any time. Such funds as QQQ, SPY, IWM, FAS are the most traded funds on the market;
d) you will not find Japanese, Chinese, Brazilian or Russian stocks on the US market, however, you may find Exchange traded Funds that track these and other stocks from emerging markets.
There are many other reasons why to give a preference to the ETFs over stocks and there is no doubt that these funds are one of the best investment choices at the current moment. |
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Author Resource:-
Charts, quotes, technical analysis, signals for indexes and exchanges (S&P 500, Nasdaq 100, DJI, etc) are essential in options trading, trading index derivatives (QQQ, SPY, DIA, etc), index emini futures and index tracking funds.
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By :
Viktor Ka
Submitted
2011-04-29 15:33:56 |
Article From Article Mayhem
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