ETF's

Discussion in 'Stock Market Forum' started by ScooterBrandon, Mar 1, 2016.

  1. ScooterBrandon

    ScooterBrandon Senior Investor

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    Anyone use ETF's or index funds as a method of investments?
    I have a few board based ones, sold all my mutual funds and got into them 5 years ago when I looked at how MER's worked...
    But there have been concerns lately over an ETF bubble.. how well or un founded are these claims?
     
  2. crimsonghost747

    crimsonghost747 Senior Investor

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    I don't currently have any but I don't mind using them for gaining exposure to markets/sectors where I have too little knowledge to make my own choices, or situations where it's simply not smart to build a balanced portfolio in that certain market/sector with the funds I have due to the fees involved.
     
  3. Penny

    Penny Well-Known Member

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    What would an ETF bubble even look like? And ETF is just a collection of securities, normally stocks. It will do exactly what the underlying stocks are doing. I can see absolutely no way the bubble effect even applies to that concept.

    I invest in ETFs to spread my risk across a category rather than choosing a single stock. I consider it one of the less volatile and safer options. Except of course in times like these when the entire stock market is in the red.
     
  4. JR Ewing

    JR Ewing Super Moderator Staff Member

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    I use ETF's for commodities exposure, and stick to those that either buy and hold the physical commodity, or who limit the amount of $ they use to buy short term futures to whatever amount of $ they have onhand from investors.

    I'd avoid ETF's that borrow heavily and are leveraged to the eyeballs. Some people complain about mutual fund fees, but better managed mutual funds are highly regulated and don't borrow heavily.
     
  5. Gazoo3000

    Gazoo3000 Active Member

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    Aren't the ETFs that borrow actually called ETN (Electronic Transferred Note). One of the newer financial instruments.

    These are debt obligations not funds. So nobody had to go out and raise money and impress investors with this type of instrument. On the up side most ETNs index a commodity sector so there are less managerial variables involved. If anyone has a better explanation, I am all ears.
     
  6. JR Ewing

    JR Ewing Super Moderator Staff Member

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    Many ETF's, hedge funds, institutions, and even small investors will often take advantage of whatever leverage their broker-dealers will give them - whether $1 in leverage for every dollar in the account, or more.

    Back before the crash, some of the big boys were levered up as much as $30-35 to $1. It was great for them until the market crashed and they lost all of their own $ and then some - Bear Sterns, Lehman, many hedge funds, etc.

    I hear about these Forex bd's who will go 10/1 for new investors just starting out with a few hundred or a few thousand. For every dollar the newbs lose in their trades, they owe their broker dealer $10 - which is probably a big reason why it is estimated that 95% of Forex traders fail quickly.

    I personally stick to the traditional 1/1, and mainly use some (not all) of my BD's cash for hedging - options, the odd short, etc. And I am never even any more than 95% of my own money long equities - usually quite a bit less.

    These days, I might typically have at least 40-50% of my own cash long equities, 10-15% long commodities ETF's, 0-5% or more in bonds, 5% or more in REITs/real estate stock, and at the very least 5% of my own $ in cash.

    I may go over 100% a little when I'm loading up more on equities, commodities, bonds, etc... and whatever considerable cash of mine and the broker's that is free is available for puts, calls, the occasional day trade, etc. I almost always have some put and a few call positions at any given time.

    David Tepper is one guy who is said to have done very well over time using heavy leverage and supposedly being more of a traditional long-only guy rather than being more of a nimble type who plays around with allocations, etc.
     
  7. Gazoo3000

    Gazoo3000 Active Member

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    Oops, I meant exchange traded funds.
     

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