The Dow Jones Industrial Average made a familiar move today back below 11,000 after spending a little over 1 week above the threshold. Beside the leveraged exchange traded funds that did poorly today, other non-leveraged ETF that took a dip include the SPDRS S&P Metals & Mining (NYSE:XME) down 6.06%, the Market Vectors Solar Energy ETF (NYSE:KWT) down 5.76% and the PowerShares Global Gold & Precious Metal ETF (NASDAQ:PSAU). Investors interested in figuring out if now is the time to plunge into mining ETFs should consider the following.
The Gold & Precious Metal ETF has been the best performer of the 3 ETFs mentioned over the past 3 years ending October 19, 2010 returning approximately 54% to investors. Top holdings for the PSAU ETF include miners Newmont Mining Corporation, Barrick Gold and Goldcorp have certainly benefitted for lofty Gold prices that are above $1,300 as of this writing. Given these types of returns investors should take the downturn in the market as an opportunity to take note of investments that have moved in the opposite direction of the overall market as represented by the Dow Jones Industrial Average and the S&P 500. (Direxion Daily Emrg Mkts Bear 3X Shares (NYSE:EDZ), ProShares UltraShort Silver (NYSE:ZSL), Direxion Daily China Bear 3X Shares (NYSE:CZI))
I do consent that over time the stock market does tend to move upward. The admission is critical because as you can see from the chart above long term investments in inverse ETFs (ETFs that go up when the market goes down) can be a risky endeavor. This type of commentary is meant to help investors who spend a majority of time only speculating about what will go up in value. Investors should also note that alternative investments offer an opportunity for profits when the momentum of the market is not headed vertical.
ETF Ready is produced and published by Gregory S. Davis of the Registered Investment Advisory G.Davis Capital (http://www.gdaviscapital.com/)