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Are You Ready for the Next ETF Bull?

bullmoneyIn recent weeks, we’ve been seeing some exchange traded funds (ETFs) start to pop above their 200-day moving averages. Eventually, we will be in a new bull market. What can you do to be ready for it? There is no way to tell when the market will definitely turn around and re-enter bull territory, but there is no question that it will eventually. As an investor, there are some things you can do to be prepared. Brett Arends for The Wall Street Journal has 12 tips to share: Go Global. Staying on domestic ground is not the safest or smartest strategy. Two-thirds of the world’s market cap lies outside the United States. By putting your eggs in a few different baskets and covering overseas markets you can diversify and spread out your risk. Avoid Big Moves. Buying and selling heavily in one session is not a smart thing. Wait, watch and follow market trends, be thoughtful and methodical. This way your decisions will not be rash or emotional. Investors Are the Markets. Remember that when everyone is trying to predict “the market,” they are effectively chasing themselves through a hall of mirrors. Past, Present, Future-Be Aware. Shares are rising, have risen, will rise, all have different meaning. Pay attention, and do not follow the leader. This ties into point number three - watch the trends for signals. Diversification That means investing across a spread of different asset classes and strategies. Asset class blends do not equal diversification. On the flip side, be aware of over-diversification and taking on more than you can manage. Forecasts Are Simply That. Nobody has a crystal ball-NOBODY. Take forecasts with a grain of salt, and wait for actualities before making your move. Understand What You Are Doing. The stock market has infinite risk tolerance and an infinite time horizon. Real people can’t compete with market indexes, and shouldn’t try. Don’t buy things you don’t understand - a case in point is short and leveraged ETFs. Some investors have bought them and gotten burned because they didn’t understand how they should be used. Who Is TINA? Sooner or later someone will urge you to buy shares, even at very high prices, because There Is No Alternative. There are always alternatives. Full Story:
ETF BASIC NEWS May 7, 2009 4:27pm

Commodity ETPs & ETFs Closing In On A Bull Market

commoditiesOver the past trading week, one thing's become quite clear: Risk trades are back. A resurgent stock market, for one thing, attests to a definitive shift in investor expectations. Monday's market action brought the S&P 500 Composite past the breakeven mark for the year after being down more than 33%. The eight-week rally spilled over into other equity markets, but rising stock prices aren't the only marker of investors' sharpening appetite for risk. Credit spreads have also tightened, indicating a greater willingness on the part of commercial banks to lend. Tuesday, three-month dollar LIBOR (London Interbank Offered Rate) slipped below 1%, shedding 44 basis points (0.44%) since the beginning of the year. At the height of the credit crisis in October, three-month dollar loans were priced as high as 4.82%. Traders have moved from the relative safe haven of the greenback to higher-yielding resource-linked currencies like the Aussie and Kiwi dollars and the South African rand. Yields on U.S. Treasury securities, as a consequence, have jumped to levels not seen since November. The Fed Funds traded rate - the actual price at which excess reserves are loaned between banks - has risen toward the top of the Federal Reserve's 25-basis point target range, after being offered at bottom-scraping rates for weeks. Commodities - that is, certain commodities, such as crude oil, base metals and the softs - have awakened to turn upward. At the same time, interest in safe-haven gold has been eroding. The renewed interest in commodities has been reflected in the price trends of broad-based exchange-traded products (ETPs). Among the half-dozen notes and funds with trading histories of at least 200 days, five have broken to the upside of their 50-day moving averages. None has yet risen above its 200-day mark, the threshold for heralding a primary bull market. The one exchange-traded note (ETN) now trading below its 50-day average is paradoxically the one closest to starting a bullish trend. So, which commodity exchange-traded fund (ETF) or note is the most sensitive bellwether of a nascent commodity bull market? Full Story:
ETF BASIC NEWS May 7, 2009 2:19pm

Ascensus Adds ETFs to Increase Fee-Based Platform Flexibility

retirement-plansAscensus, the nation's largest independent recordkeeper and administrator for retirement plans in the micro- to large-market segments and a leading provider of regulatory expertise, plan document services and participant enrollment support, has enhanced its PrudentAdvisor(TM) and PrudentLink(TM) fee-based advisor retirement plan solutions with the addition of exchange traded funds (ETFs). Through this development, financial advisors and third party administrators have more investment options and increased flexibility to design a truly customized retirement program for their clients.
Unlike other defined contribution programs that offer ETFs, the Ascensus offering has several key distinctions. ETFs are available to plans of all sizes and can be offered in conjunction with a broad selection of mutual funds. In addition, ETFs are directly traded, allowing participants to own actual shares of the ETFs. Ascensus' trade platform aggregates and nets trades before going to market, providing an innovative and cost-effective solution. Recognizing these advantages, iShares, a leading provider of ETFs, selected Ascensus as a Preferred Provider for advisors looking to use ETFs in 401(k) plans.
ETF BASIC NEWS May 7, 2009 1:50pm

Are ETFs and CEFs Good for Dividend Investing?

dividendsDividend investing is not about buying high-yield stocks to generate a high income. Instead, dividend investing is all about finding solid dividend stocks that are reasonably priced and are expected to continue raising their dividends in the future. Most of the time their current yields aren’t eye-popping, but the growing divdends over time will more than compensate for the current yield. So, are Exchange Traded Funds (ETFs) and Closed Ended Funds (CEFs) a good fit for this strategy?   A couple of years ago, I started adding select ETFs and CEFs to my income portfolio. At the time, my thought process was that these funds would diversify my risk and add a degree of stability to my income portfolio. Initially, I had high hopes for their success. Here’s what I am holding and a synopsis of how they have performed: Vanguard Financials ETF (VFH) Vanguard Financials ETF seeks to track the performance of a benchmark index that measures the investment return of financial stocks. I first purchased VFH in August 2007. Like the financials it tracks, VFH’s dividend has steadily fallen from $0.45/share in October 2007 to $0.06/share in March 2009. PowerShares International Dividend Achievers Portfolio (PID) PID seeks to match the performance of the International Dividend Achievers Index by investing at least 90% of its total assets in dividend paying common stocks of this index. This index tracks the performance of dividend paying American Depositary Receipts or ordinary stocks trading on the NYSE, NASDAQ or AMEX. Full Story:
NYSE:PID May 7, 2009 1:38pm

5 Small ETFs Showing Large Results

gradeWhile we were distracted by the bigger names in the world of exchange traded funds (ETFs), some smaller ETFs you might not know about have been on fire for the last month. With everyone’s minds preoccupied by the real estate sector, financial news, or the economy in general, most smaller ETFs are not getting the limelight they deserve. Well, here are five lesser-known ETFs that have produced large results in a short amount of time. Warning: Understand that while the assets are low, the holdings within these funds are still liquid. There can be wide bid/ask spreads, so be sure to use limit orders if you buy funds with low assets. Rydex S&P Smallcap 600 Pure Value (RZV): $14.8 million in assets; up 52.8% in the last month; expense ratio of 0.35%; 115 holdings. It tries to mirror the performance of the S&P SmallCap 600/Citigroup Pure Value Index. Small-caps could be leading the way out of the recession, since they’re more nimble and quick to react. Full Story:
NYSE:RZV May 7, 2009 10:52am

Mutual fund execs: brace yourself for ETFs hitting the $1 trillion mark in assets

trillionA trillion dollars (US$) in exchange-traded funds or ETFs? If you're a mutual fund executive, the prospect of the new kid on the block achieving such a milestone would be a nightmare. But the combination of investor acceptance and resurgent equity markets could make it a reality sooner than you might think. "This trend of asset inflows into ETFs will most likely continue and take the market to the trillion dollar market," writes ETFtrends this week in a piece entitled "The Numbers Don't Lie: Why Investors are Warming up to ETFs." It always used to irk Canadians that we couldn't buy Vanguard's index mutual funds, whose Management Expense Ratios (MERs) are about as rock bottom as you can get. As the full and empty glasses indicate in the illustration, the less the investment management company takes in fees, the more money the investor gets to keep.   When Vanguard added ETFs, it no longer mattered that Canadians couldn't buy its index funds  The day Vanguard expanded into ETFs was when I realized how big ETFs were going to be. And while Canadians still can't buy Vanguard index funds, it's a moot point because they CAN buy its ETFs, no matter what stock exchange they trade on.   Admittedly, ETFs still have a way to go before they reach $1 trillion. They were around US$593.3 billion by February of this year, according to this article in the Financial Times published late in April. But that's hardly reason for mutual fund execs to let their guard down. Consider that in the last ten years, ETFs assets have surged 15-fold from just US$39 billion in 1999. They now account for almost 25% of the trading volume in American markets. Add that growth rate from new money thrown at ETFs from investors to the kind of market growth we've seen since early March, and $1 trillion is hardly a fantasy number. Full Story:
ETF BASIC NEWS May 7, 2009 10:33am

Fidelity Independent Adviser to Interview Five Star Fund Manager Today

phone2Donald R. Dion, Jr., the president and chief investment officer of Dion Money Management and publisher of The Fidelity Independent Adviser will be interviewing ETF Market Opportunity Fund (ETFOX) manager Paul Frank in a live investor conference call today at 3 PM EDT. Investors can call (866) 939-8416 and enter code 4273178 at 3 PM today to participate. ETFOX Is a mutual fund comprised of ETF's whose goal is to Outsmart the S&P 500 Fund’s top holdings: * PowerShares QQQ 14.31% * iShares Russell 1000 Growth Index 10.17% * Vanguard Growth 9.41% * Vanguard Small Cap 8.44% * iShares G.S. Semiconductor 7.94% * Vanguard Info. Tech. 7.00% * Vanguard Value 5.03% * iShares Dow Energy 4.55% * Vanguard Small Cap Growth 4.27% * Ultra Russell 2000 Proshares 3.27% Full Story:
ETF BASIC NEWS May 7, 2009 10:25am

The New MacroShares ETFs Revealed

housing-etpThe biggest news in ETF-land over the next month could be the launch of the MacroShares home price ETFs. Or, maybe we shouldn't say ETFs.  MacroShares is going to great lengths to remind people that these are not technically ETFs; they're exchange-traded products, or ETPs. Understanding that difference is the key to understanding how these products will work—and where they should be priced. I suspect that a lot of ink will be spilt over the coming months trying to do just that. Because they are different from traditional ETFs, and because the initial pair of MacroShares was poorly handled, MacroShares are widely misunderstood. The prospectus for these things reads like Finnegan's Wake, and the structure is unique, adding to the confusion. But that confusion is not needed. When you get right down to it, these products are pretty simple and will work well if people understand what they are designed to do.  Here's a primer. Home Price ETFs The new MacroShares Major Metro Housing Up (ticker: UMM) and Major Metro Housing Down (ticker: DMM) ETPs are designed to deliver 300% and -300% of the return of the leading national home price index, the S&P/Case-Shiller 10-City Composite Home Price Index, over a specific period of time. The last part of that sentence is critical.  Most ETFs are designed to track the performance of an index on a daily basis. The S&P 500 SPDR (NYSEArca: SPY), for instance, is designed to track the S&P 500's return today, tomorrow and forever. The fund does that by holding all of the securities in the index. Arbitrage mechanisms exist to ensure that SPY stays close in value to the S&P 500 on a minute-by-minute basis. UMM and DMM are different. For one, they don't hold "housing." All they hold is Treasuries. They deliver the return of the Case-Shiller index because they are contractually obligated to shift those Treasuries back and forth between the two funds based on the direction of the index: If the index goes up, Treasuries go from DMM to UMM; if it goes down, the opposite happens. This unique structure—often called a "teeter-totter"—is what lets MacroShares track nontypical financial metrics like "house prices." Theoretically, they could be tied to anything. Full Story:
NYSE:DMM May 7, 2009 10:08am

Why ETFs Beat Mutual Funds By A Mile

stinkI’ve been trading and investing in mutual funds for most of my life, and I’ve had some success. Yet I have to admit that mutual funds have some shortcomings as an investment vehicle. I’ll bet you’ve noticed the same things, too …  Limited Liquidity. You can only buy and sell mutual funds at the end of the day. Even worse, you don’t know the price until after you’re already committed. How crazy is that?  Exorbitant Fees. In a stock fund it’s common to pay out 1.5 percent of your hard-earned capital every year to a manager who — to put it kindly — probably isn’t missing any meals. And that doesn’t count the “loads” and “advisory fees” that go to the broker or financial planner who helps you select your funds.  Information Gap. When you buy a mutual fund, you have no idea what you’re getting. Managers are only required to disclose their holdings twice a year, usually with a 30-60 day delay. A few are generous and give out monthly updates. As far as I’m concerned, this is absolutely ridiculous in today’s fast-moving markets. See the problem? Mutual funds were a fantastic idea in the beginning, back when it was hard for individual investors to build their own stock portfolios. Like many good ideas, they had their day. Now a new generation is taking the lead. So do you want to stay out front? Then you need to learn about ETFs. SPY: The First ETF Back in the 1980s, index investing started becoming popular. More than a few people were doubtful about the ability of mutual fund managers to “beat the market” over long periods of time. And if you can’t beat the market, why not just buy the market? Back then Vanguard dominated the index fund business. But their funds still had limitations — especially if you wanted to buy and sell frequently. So along came a Spider. Full Story:
NYSE:SPY May 7, 2009 10:06am

Why Some Think Natural Gas ETF Could Be Seeing a Spike

naturalgasNatural gas prices are low, but one CEO is predicting a big rebound that could benefit related exchange traded funds (ETFs). Chesapeake Energy Corp.’s CEO Aubrey K. McClendon said that the current price levels aren’t strong enough to support a North American rig count, which is setting the stage for a “dramatic” reversal, reports Randy Ellis for News OK. How high prices will go, no one is claiming to know. But McClendon points out that a year ago, prices were too high at $12 to $13 per thousand cubic feet; now they’re far too low, at $3.50 per thousand cubic feet. Full Story:
ETF BASIC NEWS May 6, 2009 4:20pm

Year to Date Performance of Leveraged ETFs

report-cardIn our last post we looked at non-leveraged ETFs, and below we highlight the best and worst performing leveraged ETFs so far in 2009. Even though the market is trading close to flat year to date, only 27 of the 110 leveraged ETFs that we track are up for the year. The double long technology ETF (ROM) is up the most at 36.37%, followed by the double long semiconductor ETF (USD), the double long QQQs (QLD), and the double short long-term Treasury ETF (TBT). The second best performing double short ETF is the Japanese Yen (YCS).  click chart below to enlarge Full Story:
ETF BASIC NEWS May 6, 2009 2:54pm

Best-Performing ETFs Invest in Real Estate

real-estateThe best-performing exchange-traded funds signal a bottoming in two key areas of the U.S. economy: real estate and commodities. The ETFs also point to a bottom-fishing expedition in value stocks. After excluding the 20 ETFs that use leverage, 10 of the 25 best-performing funds in April invest in real estate. Pending sales of existing U.S. homes rose in April for the second month in a row, showing buyers are locking in prices that are cheaper than at any time in a generation. Add to that a gain in construction spending bolstered by commercial and government stimulus projects, and the foundation is laid for an upturn. Of the real estate funds, none performed better than the iShares FTSE NAREIT Retail Capped Index Fund (RTL Quote). The fund returned 51% as four of its holdings more than doubled in value, including 236% from CBL & Associates (CBL Quote), 180% from Macerich (MAC Quote), 118% from Pennsylvania Real Estate Investment Trust (PEI Quote) and 106% in Cedar Shopping Centers (CDR Quote). Full Story:
NYSE:PEI May 6, 2009 1:54pm

Energy stocks rise, led by XTO, Devon

oil4NEW YORK (MarketWatch) - Energy stocks moved up to their highest levels in months on Wednesday on bullish signs in the latest petroleum inventory data, while earnings from XTO Energy and Devon provided a lift. Crude-oil futures also buoyed energy stocks, with crude prices breaking through the $55 a barrel level after government data showed U.S. crude inventories rose less than expected last week. See Futures Movers. The Amex Oil Index (XOI) jumped 2% to 941, a level not seen since February. Sector leaders Exxon Mobil (XOM) and Chevron (CVX) rose 0.2% and 2% respectively. Both oil majors are components of the 30-stock Dow Jones Industrial Average ($DJ), which rose 10 points. The Amex Natural Gas Index (XNG) rose 3.3% to 428. The Philadelphia Oil Service Index ($OSX) rose 3.2% to 169. Among stocks in the spotlight, Transocean (RIG) rose 2.5% to $74.81 after its earnings update. See full story. XTO Energy (XTO) jumped 10% to $41.82 on its increased earnings in the first quarter. See full story. Devon Energy (DVN) rose 9.3% to $59.54 after its quarterly update. The natural gas producer said it lost $4 billion on a large non-cash charge, but its adjusted net income beat targets Full Story:
ETF BASIC NEWS May 6, 2009 12:42pm

Guarding Your Investment Portfolio Against the Next Downturn

umbrellaSAN DIEGO ( – “What a difference a day made,” is one of the outstanding American songs made popular by the great Dinah Washington. From an investment perspective we might say, “What a difference two months makes!”

If you’ve already forgotten what’s just occurred or perhaps, you’ve been hibernating, let me refresh your memory.

Just two months ago, stocks were in a freefall. As they say in baseball, “They (stocks) couldn’t buy a base hit.” Today, stocks have staged one of the largest rallies in modern history. Since touching March 9th market lows, the total U.S. stock market (NYSEArca: VTI) has rallied by 36%, emerging market stocks (NYSEArca: EEM) are up by a dazzling 50% and international stocks (NYSEArca: VEA) have jumped 40%.

Before suddenly concluding that the worst is behind us, focus on ways to protect your investments. After such a sharp rally, is it time to realize some of the market’s recent gains? What can you do right now to shield yourself from the market’s next downturn?

Let’s analyze some basic investment strategies that can help you to guard your profits.

The Automatic Sale Many investors have difficulty in pulling the trigger when it comes to selling their investments. And it’s not hard to see the reasons why. After owning a stock, exchange-traded fund, or another type of investment for years, we have the human tendency to become emotionally attached to that investment.

To avoid the internal debate of when to sell your stocks or ETFs, think about using a stop loss strategy. Although it may sound complicated, it’s not. The basic idea is to lock in any gains you may have and to prevent your losses from mounting into the kind from which no recovery can be made. The stop loss sell order triggers an automatic sale of your shares once they hit a pre-determined price. Most brokers will be able to accommodate your stop loss order request. Be sure to ask them.

Full Story:

ETF BASIC NEWS May 6, 2009 12:27pm

NSX Releases April 2009 ETF/ETN Data Report

repotNational Stock Exchange, Inc. (NSX(R)) announced that assets in U.S. listed Exchange-Traded Funds (ETF) and Exchange-Traded Notes (ETN) totaled approximately $540.2 billion at April 2009 month-end, an increase of 10% over March 2009 month-end when assets totaled approximately $489.2 billion. At the end of April 2009, the number of listed products totaled 844, compared to 719 listed products one year ago.   April 2009 net cash inflows from all ETFs/ETNs totaled approximately $8.5 billion. Year-to-date net cash inflows totaled approximately $12.6 billion, an increase of 59% over the same time period in 2008 when year-to-date net cash inflows totaled $7.9 billion. In addition, ETF/ETN notional trading volume totaled approximately $1.6 trillion for April 2009, representing 33% of all U.S. equity trading volume. To view the full reports go to: . Full Story:
ETF BASIC NEWS May 6, 2009 12:15pm

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