Mutual funds and ETFs have always made for strange bedfellows. While they compete for investor dollars, they may share the same corporate parent. And fund shops that don’t offer ETFs are justifiably worried about losing business to exchange-traded investment vehicles. (ETFs are similar to mutual funds in that they hold many stocks, but ETFs trade as a unit throughout the day, whereas mutual funds are priced just once a day, according to their holdings.) ETFs now hold more than $500 billion in assets, including net inflows of $176 billion last year. And according to a recent report by Strategic Insight, ETF assets are on track to top $1 trillion by 2011. “The ETF world is slowly pushing the mutual fund world out of the picture,” says Robert Pavlik, chief market strategist for Banyan Partners LLC, an investment advisory firm in Palm Beach Gardens, Fla.

If mutual funds are getting to be a tougher sell, in fact, it’s because fund companies are undercutting their own business with similar ETFs. Vanguard, for instance, offers 33 ETFs that are essentially just alternative share classes of their mutual funds. But the ETFs have annual expense ratios that are a fraction the mutual funds’, and the differences, while small, can add up over time. Vanguard recently launched a foreign stock ETF — the FTSE All-World ex-US Small Cap fund VSS with annual expenses of 0.38%, or $38 for every $10,000 invested — versus 0.6% for a Vanguard mutual fund that tracks the same index. Sure, the ETF only saves $22 a year, but compounded over time it can add up to thousands of dollars coming out of investors’ pockets

Full Story: http://www.smartmoney.com/investing/etfs/sibling-rivalry-mutual-funds-vs-etfs/?cid=1108?mod=smartmoney

ETF BASIC NEWS

Sure, we all like to think long term, but sometimes you need to shorten your focus. Here are some places to look.

Even though we investors are trained to think long term, which typically means several years, sometimes a lot of things can change in just a few months. As an example, look to the performance of the Standard & Poor’s 500.

VWO

Within the medieval pseudoscience of alchemy there was a centuries-long search for a tool, the philosopher’s stone, that could turn worthless lead into ever-desirable gold. There has been a similar quest in the ETF world for the past few months: Could an ETF of toxic bank assets help the current financial crisis by converting impossible-to-sell securities into a transparent, market-priced portfolio? After all, ETFs have already brought exceptional liquidity for individual investors to previously obscure areas of the bond, commodity, and global equity markets. If liquidity really presents the main difficulty in valuing the toxic assets weighing down on bank balance sheets, could the millions of investors on major equity exchanges help? Here at Morningstar, we do not believe so for a multitude of reasons, involving both the nitty-gritty of how to build an ETF of toxic assets and the very nature of the complex securities that caused all this trouble in the first place.

Unfortunately, we have to defer the latter points to another article that delves into the rise and fall of structured finance, and how it led to such a large amount of precarious assets that now endanger the banks who created them. For now, we will just take as given that banks hold these complex assets, which are essentially deeds entitling the banks to a share of the payments on a variety of mortgage, business, and consumer loans. However, those shares of the payments have been sliced and diced multiple times, pass through several intermediaries, and have such a confused paper trail that no one in the banking world quite knows how much they’re worth anymore. If the prospects for these assets already sound pretty hopeless, you’re getting a pretty good idea of why we are so skeptical.

Full Story:  http://news.morningstar.com/articlenet/article.aspx?id=287803

ETF BASIC NEWS

On paper, the hedge fund industry is one ripe for a challenge from the ETF industry. Hedge funds have high manager risk, and were previously out of reach for many investors due to high minimum investment requirements and exorbitant fees. Enter the hedge fund ETF.

The First Ever Hedge Fund ETF: QAI

The IQ Hedge Multi-Strategy Tracker (QAI) began trading last month as the first ever hedge fund ETF. Of course, it’s not the first time someone has used ETFs to mimic hedge funds. Many people have utilized ETFs to build their own hedge funds, so to speak. Though, this strategy requires active research and management, and wouldn’t necessary track the publicly available hedge fund activity, which QAI does.

QAI is also unique in that it doesn’t try to execute a particular hedge fund strategy, but rather tries to to replicate the returns of the IQ Hedge Multi-Strategy Index, which tracks the entire hedge fund universe. Essentially, it buys the entire hedge fund market, which includes long/short equity hedge funds, global macro hedge funds, market neutral hedge funds, event-driven hedge funds, fixed income arbitrage hedge funds, and emerging markets hedge funds. It doesn’t invest in hedge funds directly, but instead in other instruments which can allow it to mimic their returns.

Full Story:  http://seekingalpha.com/article/132180-will-hedge-fund-etfs-outperform-hedge-funds

QAI

The oft-repeated notion these days that “buy and hold is dead” is a welcome sound to the ears of Abhay Deshpande, a co-manager of First Eagle U.S. Value Fund: It just means more treasure is there to be found, abandoned by those too panicked about near-term performance.

“We say buying stocks at reasonable multiples, of companies that don’t have questionable business models, that have strong balance sheets, and have low risk of impairment can be quite profitable over the long term,” says Deshpande.

Over the past year, buffeted by the downturn that began in earnest in September 2008, the $336 million First Eagle U.S. Value Fund (FEVAX) has lost 22%, but year-to-date its return has been 1.16%. In the past four weeks, it has posted a return of nearly 9%.

Food for thought

One stock the fund favors is the PowerShares DB Agriculture Fund DBA an agricultural commodity ETF.

Deshpande likes the appeal of food commodities as “real assets” at a time when the debasement of currency is a major problem around the world.

“Also, farm financing — as with all financing right now — is very tight, and that’s creating a supply imbalance,” Deshpande said.

Another thing favoring agriculture right now is that in China, with hundreds of millions of people growing their incomes and moving into the middle class, meat will be much more in demand. “And where there’s a need for beef, there’s a need for grain,” Deshpande explained.

The ETF has fallen to the low $20s from the mid-$40s range last July. It closed Monday at $23.67, off 3.4%.

Full Story:  http://www.marketwatch.com/news/story/first-eagle-favors-agriculture-etf/story.aspx?guid=%7B0DF2B535%2D606C%2D468C%2DAAFF%2D97B68F4677ED%7D&siteid=yhoof

NYSE:DBA

There’s more where that came from.

That’s what some market watchers are saying about Monday’s sharp selloff, following a stunning-yet, some say, suspect-run-up of well over 20 percent from the standing bear market low of March 9. 

“Whenever you get that kind of move in that short a period when news is still mixed, you’re vulnerable to a setback,” says money manager Jim Awad, managing director at Zephyr Management. “We’ve gone from the bear market to the never-never land.”

Caution and skepticism has been building in some quarters recently, particularly as the Dow Industrials hugged a 200-point trading range over the 11 sessions going into Monday.

To some, however, the writing was already on the wall late last week, even as the major indices edged to new highs Friday in their spring sprint.

“This thing is due,” veteran market watcher and UBS floor operations director Art Cashin told CNBC early Friday. “I’m betting we’re going to see that pullback in the rally.”

Cashin, among other things, cited the narrow nature of the rally and how many of the stocks attracting interest were “low-priced stocks,” often a sign of indiscriminate bottom fishing. 

Sam Stovall, chief investment strategist at Standard’s & Poor, says technical data and historical trends pointed to an April 17 high, followed by the typical retreat and retesting of the bear market low.

In his March research note, Stovall said the S&P 500 could post a rally in which it recovered some 22 percent of what it lost during the bear market in a 39-day period, the historical rule.

“If history repeats itself, we would probably go through a retest,” said Stovall. “We’re just at the beginning of the retest today.”

Full Story: http://finance.yahoo.com/news/History-Says-Pullback-From-cnbc-14987078.html?sec=topStories&pos=7&asset=&ccode=

ETF BASIC NEWS

The asset management arm of TD Ameritrade has been quite active recently. And it appears to be ramping up for a bigger presence in the exchange-traded funds market.

In a filing dated April 20, the company has amended past requests for new ETFs through its TDX Independence Funds group. Among the main changes is the creation of a new family of ETFs to be marketed and operated as the X Funds family.

Earlier this month, TDX Independence Funds asked the Securities and Exchange Commission to make Amerivest Investment Management the investment adviser to its series of five target-date ETFs. The filing also made it clear that struggling XShares Advisors could be removed from the family in the future. (See story here.)

A spokeswoman for TD Ameritrade declined to comment on Tuesday about action regarding any pending filings.

The most recent document explains that X Funds is an open-end management investment company organized as a Maryland corporation. X Funds filed with the SEC a registration statement last October. But it hasn’t been approved yet.

“X Funds … will offer a number of different series of funds with distinct investment strategies in an exchange-traded fund format,” said the filing.

It added that X Funds currently has two portfolios. Presumably, those two portfolios would be the first X Funds out of the gates. Those are:

• The Nations Large Cap Enhanced Covered Call ETF. It’s expected to be subadvised by Esposito Partners LLC, according to the filing.

• The CRB-Research Global Energy Efficiency ETF.

Full Story: http://www.indexuniverse.com/sections/newsinfocus/5738-td-ameritrade-group-files-for-new-etf-family.html

ETF BASIC NEWS

(UK ETF NEWS) If you believed the hype you would believe that exchange traded-funds (ETFs) had become the investment choice of private investors.

But while overseas investors, particularly in the US, have embraced this cheap and flexible way of investing, private investors on these shores have been more reluctant to join in, accounting for fewer than 10pc of ETF trades.

Deborah Fuhr, the head of ETF research at Barclays Global Investors, blames lack of remuneration for financial advisers for the difference. “In the US a decade ago, sales were low because advisers expected a rebate or commission, but that has changed. Once American advisers started using them they realised how useful they could be for their clients. Now 40pc of ETF trades in the US are made by private investors.”

Yet the British could be missing a trick because many professionals reckon EFTs add to an investor’s armoury.

Justin Urquhart-Stewart of Seven Investment Management said he could build a fully balanced and diversified portfolio using only ETFs. “They have great flexibility – and if they are good enough for Warren Buffett they should be enough for you or me.”

Adrian Lowcock of Bestinvest, the financial adviser, said: “We use ETFs as they are a cheap and effective way to track a market and can provide a core holding to a sector with other satellite holdings being used to add value to a portfolio.”

Full Story:  http://www.telegraph.co.uk/finance/personalfinance/investing/5170250/Exchange-traded-funds-the-Citys-best-kept-secret..html

ETF BASIC NEWS

Exchange-traded funds have emerged as a cost-effective and popular way to gain exposure, as they allow the purchase of specific commodities in small lots, without taking delivery.

“Actual delivery, however, does take place by the fund, which means it’s only available in more liquid markets such asgold, silver and oil,” the ANZ’s Pervan says.

Apart from buying bars and coins, gold ETFs offer the most direct route and way to track the price of gold. While popular in the US and across Europe, Australia has only one gold ETF, launched by ETF Securities in 2003. The GOLD fund has about $700million invested, up from about $330 million six months earlier.

The GOLD ETF trades like any other ASX-listed security, says Jonathan Morgan, business development manager at ASX Listed Managed Investments. It is bought or sold on the Australian Stock Exchange in the same way as shares, and posts several thousand trades a day.

While other listed ETFs have market makers in place, a professional securities dealer who has an obligation to buy when there is an excess of sell orders and to sell when there is an excess of buy orders, such as the international ETF range and the newly listed metal ETCs, the GOLD ETF does not need one because it has a sufficient spread of shareholders.

The advantages of an ETF are that they are cheap, there’s no storage cost and they are easily exchangeable. They are good for retail investors because they do not require the investment of large sums of money.

The minimum investment is one GOLD security, which costs about $150, representing one-tenth of an ounce of gold. The annual management fee is about 0.40 per cent, and as the security is bought in the same way as shares, normal brokerage fees still apply.

Full Story:  http://www.theaustralian.news.com.au/business/story/0,28124,25347678-5001942,00.html

NYSE:GLD

By definition, cannibalizing describes an act where a person’s attempt to improve a condition backfires against an existing situation. Not willingly, nevertheless very effectively, investors have been cannibalizing their own portfolios.

Enticed by a multi-decade bull market, many investors tried to improve their portfolio’s return. Based on the almighty wisdom of the risk/reward principle, we know that high returns and a high degree of safety cannot co-exist.

Even though it has been thought that portfolios can be milked for extra return without giving up safety, deep down we know that one has to be sacrificed for the other. Many opted to cannibalize safety for higher returns and got neither.

A quick glance at a chart reveals that the Dow Jones (NYSEArca: DIA – News), S&P 500 (NYSEArca: SPY – News), Nasdaq (Nasdaq: QQQQ – News) and many other indexes trade at levels not seen for well over a decade. When it comes to investing, time is money and the last decade has been a ‘lost decade.’

The ‘lost decade’

Lost, why? $100,000 invested in the S&P 500 from April 1989 to April 1999 would have mushroomed into $426,000. $100,000 invested in the S&P 500 from April 1999 to April 2009 would have shrunk to less than $6,500. $100,000 invested held from 1989 all the way to 2009 would be worth $284,000 today. This translates into a 20-year average annual return of 5.3% before taxes and inflation.

Full Story: http://finance.yahoo.com/news/3-Ways-To-Stop-Cannibalizing-etfguide-14985691.html?.v=1

ETF BASIC NEWS

While the exchange traded fund (ETF) market has shown considerable growth, some money managers are picking individual stocks once again. Is this the way things are going to be now?

Geoffrey Rogow for The Wall Street Journal reports that ETFs accounted for 40% of the total U.S. equities market in late October, and now the volume is around 35%. Is this the sign that single stock risk tolerance is back?

Institutional investors may be ready to rely less on ETFs and more upon single stocks as hedges, and excess cash is no longer an issue. While the diversification benefits are many, there are ways to access the best companies without holding the not-so-great performers either.

Full Story:  http://www.etftrends.com/2009/04/why-etfs-will-trounce-single-stock-picking.html

ETF BASIC NEWS

If you’re not using a leveraged or inverse fund these days, your chances of owning a top-performing ETF is greatly reduced.

On the other hand, if you do own a leveraged or inverse ETF, that doesn’t guarantee a winning hand. In fact, it might ensure just the opposite.

With leverage, if your ETFs haven’t made any of the “best” lists lately, chances are you’re going to wind up a big-time loser.

In the world of highly charged ETFs that provide 200% or even 300% leverage of their underlying indexes, few performance numbers fall in between the cracks. It’s an all-or-nothing game.

For example, if you’d bought the Rydex Inverse 2x S&P 500 ETF (NYSE: RSW) one year ago today, you would’ve gained more than 40% by now. If you’d bought the ProShares Ultra S&P 500 ETF (NYSE: SSO) in that same period, you would’ve lost 60%-plus.

The only real pattern showing up since the onslaught of leveraged and inverse ETFs on the market is that leaders will more likely than not come from one of those two categories. Whether it’s one or the other is dependent, of course, on the particular cycle at the time.

So how can you hope to own a real ETF winner without juicing up your portfolio these days?

It’s easier than you think. And best of all, you really don’t need 2x or 3x ability to be a top performer. In fact, it’s probably counterproductive for most long-term investors to own a leveraged ETF.

Full Story:  http://www.indexuniverse.com/sections/features/5734-falling-behind-the-price-of-not-using-leverage.html

RSW, SSO

ETF providers entice investors to new offerings with gain-enhancing features like “risk exposure,” “retirement solutions” and “investment strategies.” The list goes on.

But regardless of what you buy or what happens in the market, the outcome ultimately depends on what’s happening in your brain, says Janice Dorn, a financial psychiatrist and gold futures trader. Dorn has mentored or coached more than 600 investors/traders. She counsels that you must master yourself in order to master ETFs.

IBD: What proportion of your clients specialized in trading ETFs? And what were their most common problems?

Dorn: At least 40% of the traders I have mentored or coached trade ETFs and, of these, approximately 30% specialize or want to specialize in ETFs.

The chief complaint of most traders is that they are unable to make or keep enough money. They are failing, depressed, anxious and stressed. Their challenges manifest in several ways including: inability to take a trade, not cutting losses, taking profits too quickly, not adhering to stops, having no real concept of risk or risk management, and overtrading.

Full Story:  http://finance.yahoo.com/news/Try-Putting-Your-Bad-Trades-ibd-14978969.html?.v=1

ETF BASIC NEWS

April 21 (Bloomberg) — Platinum fell to a two-week low in New York on speculation that automakers, the biggest users of the metal, may buy less as car sales decline. Palladium was little changed.

U.K. auto sales show no sign of a recovery, the country’s main industry group said. Registrations fell 31 percent last month and “it’s not looking any better in April,” Paul Everitt, head of the Society of Motor Manufacturers & Traders, said in an interview. U.S. auto sales tumbled 37 percent in March. Most platinum and palladium is used in car parts.

“The fundamentals still remain weak overall from the auto sector,” Miguel Perez-Santalla, a sales vice president at Heraeus Precious Metals Management in New York, said in an e- mailed note.

Platinum futures for July delivery fell $11.10, or 1 percent, to $1,156 an ounce at 10:20 a.m. on the New York Mercantile Exchange. Earlier, the price touched $1,153, the lowest for a most-active contract since April 7. Before today, the platinum dropped 44 percent in the past 12 months.
 
Full Story: http://www.bloomberg.com/apps/news?pid=20601012&sid=aWlQmyL5_HGs

ETF BASIC NEWS

New York, NY (PRWEB) April 21, 2009 — Gryphon Financial introduces Exchange Traded Funds, or ETFs, to their subscribers via The ETF Express Bulletin investment newsletter. ETFs, a collection of securities that track specific market indexes and cost very little, are the fastest growing investment tool in the United States today!

“Mutual funds are so yesterday,” says Michael Warren, trader and founder of GryphonFinancial.net. “Prominent investors believe ETFs are the new way to go.”

“ETFs cover such a broad spectrum. One bad apple doesn’t spoil the whole bunch. When you trade a basket filled with stocks, wouldn’t it be better using a longer time frame opposed to a shorter one?” asks John Gage, trader and investment guru for Gryphon Financial.

“Short-term time history will show you how much smoother the price movement is with a lot less noise,” Gage explains.

Owning a basket of securities is more comfortable and beneficial than owning just a few individual stocks. Usually ETFs can be purchased with stops and limit orders and are available for margin buying.

Want to avoid trading catastrophes? ETFs are automatic diversified equities that minimize risk!

“Investors are similar to carpenters; they need the right tools to get the job done. I myself have over a dozen different techniques that I have carefully tested under different market conditions,” says Warren, whose stock tips have earned Gryphon Financial subscribers great returns on their investments.

Obviously, ETFs have to come at some cost, but in comparison to similar products, ETFs cost less. Cheaper to manage since, unlike mutual funds, they don’t not have back-end expenses, ETFs enable investors to trade specific sectors, while paying one commission for an entire group of stocks within one industry.

Full Story: http://www.prweb.com/releases/2009/04/prweb2331114.htm

ETF BASIC NEWS