One good lesson is that we need to learn to make our own
investment decisions -And Not Let Brokers Make Choices For
Us!
This is a basic fact that we have been teaching for many
years now. Most investors either blindly throw money at the
market or let a broker do it for them. With just a little
time and effort, you can learn to direct your investment
accounts and retirement funds on your own.
In this article we want to point you in the right direction,
and give you a few crisis tips too.
An excellent alternative to mutual funds are the fairly new
Exchange Traded Fund (ETFs) vehicles.
There are now ETFs that cover every sector of the market.
ETFs offer many advantages over mutual funds. Here are just
a few:
* Tax Advantages – ETFs seldom sell any equity positions or
create a taxable event. Mutual funds often do this. With
mutuals, you could owe tax on part of the funds holdings
(the winning stocks they sell at a profit) even though you
lost money over all. A double whammy!
* Less Management Costs – Even No-Load Mutual funds have
become top heavy with many "Professionals" employed and
eating up GIANT parts of the profit. You might think of ETFs
as Electronically Traded Funds. MUCH less management costs (in
some cases no management costs) and the ease of trading
them.
* Diversification – Let's face it, this is what was
attractive about mutual funds to begin with. Instead of
picking out stocks on your own, you had "Professionals"
(with the meltdown we can see that most of them are not too
professional) putting together a diversified portfolio for
you. With ETFs, you can get the same if not better
diversification without the hassle of dealing with a mutual
fund giant eating up all the profits.
* Easy To Trade – With true mutual funds you can only get
out of a position After the market closes. You can trade ETFs
just like a stock in your discount brokerage account. If you
were locked into a fund when the market was in crash mode,
it was not a good feeling. Had that been an ETF you could
have bailed at any time (before the DOW closed down 777
points!)
We could go on with the benefits of ETFs, but you should be
starting to see the picture. An even better way to call your
own shots with your investments is to trade the index (or
indices for plural). We are referring to the mini Dow, the
S&P eMini, the mini Russell and others. (there are also ETF's
the mirror the indices such as "SPY" for the S&P 500 index)
While we focus on mini-Dow trading, any index will do. With
Index trading, you just follow the overall market up, or
ride it down with a short position.
While we are on the subject of shorts it would be good to
mention that while most US mutual funds are not allowed to
short a stock, you can actually buy ETFs that do good with
the market is dropping. One such fund is ticker "DUG" which
does well when the Oil price is dropping (a tip we gave our
readers after the big run up in oil to over $140 per barrel
– at the time of this writing it has been dropping since).
You can find other ETFs that do well in falling markets. So,
you don't have to short the market (statistics show that 80%
or more of investors never do short the market – but are
always looking for a upward bull run), you just buy the
right ETF and let it do the shorting for you.
By now, many investors see the importance of having a
strategy for making money when the market is dropping. Most
investors have yet to develop this strategy. We prefer to do
it with simple index trades. Whatever you do, find a way to
make your own moves and don't depend on someone else to
invest your money for you. No one will take care of your
money like you will!
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NOTE:
To learn more about ETFs visit Yahoo Finance and look under
the Investing Tab at the top of the page – then select ETFs
www.finance.yahoo.com
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