Introduction to Exchange Traded Funds
Exchange Traded Funds (ETFs) have become a very popular form of investing over the last decade. These funds have substantially lower management fees compared to mutual funds and are traded just like a stock on the open market.
In 2006 Ultra ETFs emerged onto the scene which gives the classification of "double" the performance as they are leveraged to compound gains. For example a investor could purchase the QQQQ which is the ETF tracking the NASDAQ 100, or they could purchase the QLD which tracks double the performance of the same index.
Ultra ETFs tpyically have slightly higher management fees than a standard ETF, typically charging around .95% per year. Furthermore, the risk associated with buying an ultra ETF is realized at twice the norm. Just like buying on margin, every investor should have a set strategy before taking a position in an Ultra ETF.
Here on the Covestor Community several members have discussed ETFs in their recent blog posts. These posts should provide further insight into the strategies behind these leveraged investments:
- Inverse ETFs - Trade vs Sentiment by epicadv
- Triple ETFs - How to Trade Them by marketedge360
- Using Proshares PSQ Instead of Proshares QID by fjpenney
While most investors like to buy "long", betting that the market will go up, there are also ETFs setup to bet "short", or that a market index will go down. These are known as inverse ETFs, and they too have become increasingly popular over the recent years. The QID for example has a 2x inverse effect of the NASDAQ 100 index.
With that said, there are many ETFS to choose from. On my personal blog, stocktradingtogo.com, I have summarized a good majority of the ETFs available on the market today:
Like any investment the more educated a trader is on what they are looking to invest in the better off they are. This is especially true in today's volatile marketplace.
Comments