Awesome info for newbies like me!! Thanks Lady!!![]()
The only question not answered is do you try and buy when the ETF peaks above the 200 DMA or do you wait a couple of days to ensure support holds? I would think you would wait, but I am a rookie..![]()
Awesome info for newbies like me!! Thanks Lady!!![]()
The only question not answered is do you try and buy when the ETF peaks above the 200 DMA or do you wait a couple of days to ensure support holds? I would think you would wait, but I am a rookie..![]()
From my very small experience level, I've found that everything seems to go in cycles rather than straight up or down. If I want to buy a stock I drill down a level or two in the timeline to see where it is in the accumulation/distribution cycle and buy it on the next down wave or "pull-back." And every time I haven't waited for the pull-back I've wished I had.
Lady
If you think education is expensive, try ignorance. - Derek Bok
I'm always looking for womething that helps me to clarify my ETF trading. Here's something I found this morning.
Timely Insight for Trading ETFs More Effectively
by: Don Dion, March 09, 2009
"The advent of electronic trading and the increased accessibility of trading platforms have made the purchase and sale of ETFs more readily available to individual investors. ETFs, which have the unique qualities of both stocks and index funds during intraday trading, have an added level of transparency that has made a whole new generation of investors more comfortable trading in the open market. At the same time, the sudden influx of new ETFs into the market has led to problems for beginner traders. Some of the new ETFs have attracted the funds and investor enthusiasm necessary to thrive over the long term, but other products have failed to pick up steam and have traded at sharp premiums or discounts to their actual value or folded entirely. While no trading strategy is foolproof, by taking into account factors like net asset value, liquidity, order type and time of day, beginning ETF traders can avoid some of the pitfalls common to the marketplace.
The most important characteristic of ETFs, which differentiates exchange-traded funds from stocks, is the availability of the fund’s net asset value (NAV). Most ETFs are composed of a basket of securities, which have individual prices at any moment during their regular trading hours. Since the value of the underlying securities can be determined, the value of the ETF itself, or NAV, can be calculated. If an ETF is trading for less than NAV, it is “trading at a discount,” and if it is trading for higher than NAV, it is “trading at a premium.” Understanding premiums and discounts is important for traders who want to get their money’s worth when buying and selling funds.
To compare the current price of an ETF to its NAV, chart the symbol versus its “Intraday Indicative Value,” or “IIV.” The symbol of an ETF’s IIV is usually simply the original symbol plus “.IV”. For example, to chart the IIV of the iShares Russell 3000 Value Index Fund (IWW), you would enter “IWW.IV” into your trading platform. Most fund sponsors also offer the opening and closing prices of the ETFs, along with their actual NAVs on their websites, offering investors a unique opportunity to observe trends over time.
In addition to letting you know if you are “paying up” or getting a discount on the fund’s underlying assets, historical charting of these patterns can tell you a great deal about the health of the fund and how it trades. Many of the fund websites, such as iShares.com or Powershares.com, offer premium and discount charts, while ETFconnect.com is a good independent source for most funds. By looking at historical patterns, investors can observe whether an ETF is trading in line with its historical tendencies. If an ETF generally trades at a premium to NAV and is suddenly trading at a steep discount, investors can draw conclusions about whether the fund is over- or undervalued.
The presence or absence of premiums and discounts is also related to—and is often a consequence of—fund liquidity. Very liquid ETFs, ones that have average trading volumes in the millions, tend to trade close to their NAVs. Because there is abundant investor interest in their products, market makers and traders alike stand ready to buy and sell such an ETF close to its actual value during the trading day. In illiquid products, those in which only a few thousand shares change hands during a day, it is often difficult to find a buyer or seller for your desired purchase. Even appointed market makers are only required to provide liquidity at a certain spread and quantity, so investors in illiquid funds often end up buying ETFs for large premiums; they then have to sell them at marked discounts when trying to unload their shares.
One solution to the liquidity and value problem is for investors to seek out ETFs that trade the largest number of shares on an average day. Often, more than one fund company will offer similarly themed ETFs. When selecting a themed fund, like “emerging markets” or “gold,” it is advisable to seek out all the available ETFs in that category and compare average trading volumes. Relatively higher trading volumes indicate a higher likelihood that you will be able to buy and sell the stock for what it’s worth and also that the ETF is less likely to close up shop due to a lack of investor interest.
Sometimes, however, investors seeking a unique approach for their portfolios will need to buy and sell shares of less liquid ETFs. If this is the case, it is advisable to consider different order types when placing your buy or sell order. “Market orders,” which simply execute at the next available bid or offer, are relatively safe in large liquid funds but can result in large premiums and discounts in smaller illiquid funds. More-patient investors should instead try to place limit orders as close to NAV as possible to get fair prices on their trades. Limit orders allow the traders to pick a price at which they would be willing to buy or sell shares. If there is counterparty interest at your chosen price, the trade will execute, but unlike market orders, this execution is not a guarantee.
Despite increased electronic trading and less human interference in the pricing process, trading is still an emotional and irrational process for many. With ETFs, there is less of an excuse to buy high and sell low, because it is possible to determine—at all times—what the underlying value of the ETF is. While delays in trading data still make it difficult for individual investors to guarantee price execution at NAV, certain considerations such as liquidity and order type can significantly improve execution price. As decreased human intervention and increased access to the markets make it easier for individual investors to participate in trading, these investors must also assume an increased level of accountability when buying and selling shares."
http://seekingalpha.com/article/1248...re-effectively
Lady
If you think education is expensive, try ignorance. - Derek Bok
It thought this was interesting so wanted to 'scrapbook' it here.
How to Use ETFs As Market Indicators
June 19, 2009 at 1:00 pm by Tom Lydon
"Is there a better way to understand market trends and inter-related events in an effort to be a more keen exchange traded fund (ETF) investor?
Trang Ho for Investor’s Business Daily talked to Chartered Market Technician Brandon Wendell to get a better understanding of how studying a few ETFs can lead to a better understanding of the market’s messages.
This is how Wendell uses ETF for market analysis:
- First, he uses copper as a leading indicator, since it’s found everywhere in our society and can be a bellwether of current or future building activity. High copper demand can signal expansion. iPath Dow Jones-UBS Copper Subindex Total Return (JJC) can signal turning points in the stock market or at least correlate with moves in the stock market and give extra confirmation that the market is going to continue in one direction or the other. JJC is up 60% year-to-date.
- PowerShares US Dollar Index Bullish (UUP) is a good indicator of the health of the U.S. dollar. The U.S. dollar has been declining quite a bit recently; that’s allowed U.S. equity prices to rise. UUP is down 2.5% year-to-date.
- iShares Barclays 7-10 Year Treasury (IEF) is coming into an area of consolidation (or support) that it hit last year in October and November. This indicates interest rate are going up and as rates go up, the economy will slow as money becomes tighter.
- United States Oil (USO) and gold, Market Vectors Gold Miners (GDX) are good indicators if the market is pushing on the downside. Wendell notes that there’s about a 75% correlation between USO and the stock market, while gold itself tends to follow after GDX.
Other areas that can signal changes in the economy include ETFs such as Market Vectors Steel (SLX), iShares Silver Trust (SLV) - both metals are using heavily in building and construction - and Consumer Discretionary Select Sector SPDR (XLY). Consumer spending is two-thirds of the economy, and as consumers spend more on discretionary items, it could signal improving confidence and lead the way higher.
Whenever you invest, be ready with a strategy such as the 200 day-moving-average and this will help keep your emotions out of the equation. This will also help keep your guesswork to a minimum."
http://www.etftrends.com/2009/06/how...ndicators.html
Lady
If you think education is expensive, try ignorance. - Derek Bok
Just 5 ETFs... And You're Set? Buy-N-Hold Silliness Still Carries On
By Gary Gordon | June 22, 2009
You'd have thought that the 2000-2002 bear that ravaged portfolios in the first half of the decade would have stifled buy-n-hold, asset allocation advocates. Alas... "simpleton" journalists and "commission-based, keep-your-assets" advisers continued to push the ridiculous notion that you refrain from selling.
Certainly, the 2008-2009 bear that dehumanized investors must have put an end to the silliness, right? After all, assets from stocks to bonds to commodities to real estate demonstrated that buying-n-holding any investment type is far too risky; plainly speaking (writing), there isn't a magical asset allocation percentage that diversifies a portfolio away from life-changing losses.
It's pretty surprising, then, that:
(1) Bogle of Vanguard fame,
(2) "defrocked-a-decade-ago" Motley Fool and,
(3) Money Magazine
...have each thrown their respective fishing lines directly into the winds of change. It's surprising because more successful marketing machines began changing their tunes a long time ago. Think Suze Orman... a reformed buy-n-holder.
Bogle, founder of Vanguard, has raged against the ETF machine for nearly 10 years because ETFs seemed to be challenging Vanguard's indexing dominance. Of course, Vanguard was smart enough to develop 40+ ETFs of their own, ignoring the founder's disdain and cementing their place as one of the top financial institutions.
Keep in mind, just because ETFs are tradeable like individual securities, an indexer can still choose to be a passive buy-n-hold, asset allocator. ETFs just make it easier for an investor to buy or sell at a price point that one desires... something Bogle thinks leads investors to make poor "timing" decisions.
(Note: Ask any Vanguard 401k investor how happy they were to have restrictions and penalties for leaving or entering mutual funds. The disincentive, as well as the public pressure to "hang in there," caused millions of people to lose half of their retirement savings! Say "No" to ETFs, Mr. Bogle... really?
The idea that a financial institution knows what's better for the "average" investor such that it restricts trading activity, something that Bogle thinks is a good thing, is intrusive, oppressive and insulting. What happened to freedom of choice? If an ETF investor wishes to hold on, he/she can. If an exchange-traded index fund investor wishes to sell, he/she should have that ability!)
Not everyone is against ETFs anymore. Yet I find it ironic that the kings of foolish buy-n-holding of individual stocks, the Motley Fool, who softened their tone after the 2000-2002 bear market ruined their reputation, are now talking up ETFs.
Here in 2009, they've put forth the "only" ETFs you will ever need:
SPDR Trust (NYSE: SPY) Vanguard Small Cap (NYSE: VB) iShares MSCI EAFE Index (NYSE: EFA) Vanguard Emerging Markets (NYSE: VWO) iShares Barclays Aggregate Bond (NYSE: AGG)
So this covers the investment universe, does it? Any asset allocation for any risk level, the folks at Motley Fool claim.
An "all-in-one" aggregate bond fund that is effectively dependent on intermediate U.S. treasuries flies in the face of scores of important bond and income possibilities. Where to begin? Short, medium, corporate bonds diversify in the way that small cap stocks diversify from large-cap stocks alone. Munis, inflation-protected, foreign bonds, emerging market bonds, and yes... high quality mortgage backed. How can the world of bond investing be minimized to AGG... albeit, an excellent core holding?
Do I even need to go further with the income that's not presented above? I guess there's no need for domestic REITs or foreign REITs. Perhaps we can forget about the buy-write option income approach. Preferreds? Convertibles? Why... they must be a waste, according to Motley Fool "journalist/investors."
As for stocks, I am a big fan of Vanguard Emerging Markets (NYSE: VWO). Yet to minimize the importance of China and Brazil is ludicrous. And to minimize the criticality of small-cap funds like China Small Cap (NYSE: HAO) and Brazil Small Cap (BRF) is near-sighted at best. At the very least, you think these folks might have at least served up SPDR International Developed Small Cap (NYSE: GWX) as having relevance like U.S. small caps do. And do I even need to mention the failure to include commodities?????
Money Magazine is equally shameful, if for no other reason that the advice changes issue by issue. In "ETF Investing Done Right," the writer(s) of this July 2009 piece claim that you need just 5 ETFs to get your diversified mix of 60% stocks, 40% bonds.
Ironic, since late 2007 mixes typically showed 70%-75% stock appropriate for most. By April 2008, it shifted to 50% stock and 50% income. Now it's 60%/40%?
Keep in mind, there's no systematic rebalancing or recommended asset allocation changes taking place in the magazine. Each presentation is offered as a buy-n-hold, leave-it-alone solution for moderate risk tolerance. Pick up the magazine one month, get a "cure-all." Pick it up another month, find something entirely different.
Below is Money's "ETF Investing Done Right" for July 2009:
1. Vanguard Total Stock Market (NYSE: VTI) 35%
2.Vanguard FTSE All-World excl U.S. (NYSE: VEU) 20%
3. Vanguard Total Bond Market (NYSE: BND) 30%
4. Vanguard Real Estate Inv Trust (NYSE: VNQ) 5%
5. iShares Lehman TIPS Bond Fund (NYSE: TIP) 10%
I could "tee off" on Money Magazine for its failure to identify two of the most powerful forces in diversification: foreign bonds and commodities. For foreign bonds, one could use the SPDR Lehman International Treasury Bond ETF (NYSE: BWX) and for commodities, one could employ the services of the Powershares Total Commodity Index (NYSE: DBC).
Naturally, it doesn't make much sense to get too wound up about weak presentations from has-beens and/or media mainstreamers. As easy as ETFs are to use, an investor needs to take a bit more interest in what he/she does. Buy-n-hold asset allocating is never sensible... and 5 ETFs won't cover your retirement life adequately.
If you'd like to learn more about ETF investing... then tune into "In the Money With Gary Gordon." You can listen to the show "LIVE", via podcast or on your iPod.
Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.
http://www.greenfaucet.com/technical...rries-on/97803
Lady
If you think education is expensive, try ignorance. - Derek Bok