Kibrisab

Looking at all the exchange traded funds that have come on the market, it’s amazing. A favorite of mine is the Oil ETF, over the past 4 years the trading range is huge. For every great ETFin existance however, there is another one that sucks. Performance lag has been especially noticeable in the leveraged short area, some are actually scarey bad. There are ETF products based on the volatility futures that professional traders would have trouble working with. There is no way the average investor can use these and make a profit so stay away. Who are regulators trying to protect by not putting restrictions on some of these things. Now back to the good stuff, there really are some excellent benefits to a good ETF. Another thing to stay away from is futures based Oil ETF funds, contango can kill them, stick with non-leveraged, physical commodity ETFs or the ones that invest in commodity stocks. If you look at most oil stock ETFs (XLE, XOP, OIH) and compare it to a futures based Oil ETF, you can’t help but notice the long term winnings go to stocks instead of futures. Needless to say, you will want to look at for funds that focus on oil stocks to invest in this sector. In general, if an exchange traded fund stores the actual commodity or stocks based on that commodity you are on the right track. You can’t go wrong following this same philosophy when it comes to stock market based instruments as well. I always look for funds that hold the actual stocks that are found in that particular stock index, in my humble opinion you will consistently outperform the funds that rely on futures. The Gold ETF has been almost perfect in how well it tracks gold, but there isn’t a Physical copper etf yet. There are many examples like this that you can find, with just a few minutes of online studying you can easily pick out the good ones. It’s best to compare the ETF directly to whatever it’s trying to mirror by using a historical chart. I like to go back right to when it started trading to see the full picture. Many times you will see patterns when looking at history and that can help you make better decisions. Due to trading costs and administration fees it’s normal for ETFs to do slightly worse than the underlying over time. These fees don’t mean much to short term traders, but buy and hold investors should examine them closely. That’s another thing about the leveraged ones, they tend to have the highest fees and expenses. By focusing on plain vanilla ETFs that minimize their expenses, avoid leveraging and have good past performance you can win at the investment game!