Choosing Successful ETFs: Factors and Risks
October 18, 2018
Since the launch of Standard & Poor’s Depositary Receipts, ETFs have changed and progressed in the stock market. Now, one ETF follows what S&P 500 does. That has led it to become a favorite among investors. Furthermore, it allowed the creation of other U.S. indexes, like Dow Jones and Nasdaq 100.
However, picking the right ETFs can be tricky due to the fact that they are not all the same. Some of them can even get liquidated, usually because the investors do not care for them that much. Finding the best ETFs is vital if you want to see your business thrive.
Everyone is looking for a way to beat the market, and sometimes that’s possible. For example, this Motley Fool review explains how the Gardner brothers utilize individual stock picks to get better returns. That said, for most investors, being able to simply match the market with a safe portfolio can be a great investment. There are certain ETFs that can help you achieve this.
Keep reading to find out how to choose the right ones.
The market currently offers more than 1,900 ETFs (as of October 2016). Together, they are all worth more than $2 trillion. In addition to that, there are many different types you can choose from: commodities, bonds, indexes, and sub-indexes. You can even select an ETF which has its basis in investment and market capitalization.
Battles of the ETFs
ETF issuers are highly competitive, and they sometimes focus on ETFs that are very specific or based on a trend. One of them is Loncar Cancer Immunotherapy ETF (CNCR) which focuses on 31 stocks.
When it comes to trends, they usually focus on social interests. For example, Robotics & Artificial Intelligence Thematic ETF, and Obesity ETF (SLIM).
How to choose the right one
Choices are abundant, and you have to do your research and pick the best one. Here are some factors you should take into consideration:
- It should have a threshold of $10 million or more. Otherwise, it is not an ETF that would attract an investor’s attention. That leads to wide spreads and even poor liquidity.
- When you are research ETFs, make sure that they trade in enough volume daily. The higher it is, the better the liquidity and the bid-ask spread of the ETF.
- The underlying index. If you want your ETFs to be successful, choose the ones that have widely followed indexes. Otherwise, you might be limited to a geographic focus or an obscure industry.
- Tracking Errors. It might be obvious but bear in mind that some ETFs have poor tracking indexes. Therefore, choose the ones that have the minimal level of mistakes.
- Market Standing. You should try to avoid ETFs that are only copying someone else’s original idea. The first-movers gather all the assets, so it is counterproductive to pick ETFs that are too similar to the others.
Closing an ETF
Before the liquidation of an ETF, the issues notifies all investors about it. When that happens, investors should think fast and come up with a plan that would protect their investments. Here are some of the solutions:
- Sell it before it stops trading. If there is a risk that there might be a severe decline in the ETF towards the date when it stops trading, this is a safe choice. However, bear in mind that there will be a wide bid-ask spread because the ETF is closing.
- Keep it until it stops trading. If there is no risk whatsoever, then you can hold on to your ETF until the “stop trading date.” Still, the ETF should be from a sector where the decline risks are minimal. That also means that there will be a tighter bid-ask spread towards the end.
Nevertheless, you cannot escape the taxes that follow the liquidation of an ETF. If an investor kept them in a taxable account, he would have to pay for any capital gains.
Factors like the level of assets, and how much ETF trades during the day, are vital when choosing the best one. Furthermore, you must not forget to check the underlying index of each of the ETF you are considering.
If an ETF comes to a close, then the investor has to plan a course of action and protect his investments. He can do that by selling before the deadline or waiting until the liquidation.
The Top Hedge Fund Manager of 2017
October 11, 2017
When it comes to the stock market and big-time investments, hedge funds can be some of the most profitable investments on the market. A hedge fund is essentially big pool of money that other invested put their money into. These pools of cash are then used to invest into long-term stocks in order to produce large amount of money, which are then given to the investors as profit.
These hedge funds are very hard to get into and are not regulated very heavy. As a result, you need a lot of upfront investment and you cannot touch the first installments until period of time has passed. In most cases, you also need to have a positive reputation if you want in on a hedge fund.
These fund use aggressive trading tactics and are usually managed and overseen by a hedge fund manage. These people are very important and their main job to make sure the fund is profiting, as they also get paid if their trades are successful. There a loads of hedge fund managers and some are incredibly wealthy. In this article, we will look at the top hedge fund manager in 2017 to see just how much he makes a year.
The Top Hedge Fund Manager(s)
Out of all the hedge fund managers in the financial industry, both James Simons and Michael Platt are the top earners in the year so far. They are both famous billionaires who are in charge of some of the largest hedge funds in the market. Both of these hedge fund managers earning around the same amount, which was $1.5 billion.
Although the two earn around the same amount, they are actually very different in their approach to managing and trading. Simons, in particular, is now using computers and technology to make the trading and investing decision for him. This is a very quantitative approach to the strategy and has left a number of human-based systems in the dust. He owns the firm “Renaissance Technologies”, which manages $36 billion in clients’ money.
Michael Platt earned an identical amount to Simons but still uses the traditional trading methods back at his company in London – BlueCrest. Platt uses a lot of human-based teams opposed to the Simons robot army and has them broken up into teams in order to make clever, highly profitable trades. What is interesting about Platt recently gave back $7 billion to the investor and has been trading his own money. The firm used to hold $36 billion in funds.
About Hedge Fund Managers
Being a hedge fund manager is a very stressful job but if you are good at it and make good calls, you can be very profitable. The two individuals on this list are both billionaires because of the trades they make and have built some impressive companies. Not a lot is known about what will happen by the end of 2017 and who will be on top. In general, the hedge fund market seems to be in a bit of a dip and many firms are struggling. Hopefully, things start to pick up in later years.
Differences Between Day Trading and Investing
June 20, 2017
There are a million ads broadcasting wealth through day trading. Truly, day traders and long-term investors both profit and both lose money. Some fruitful long-term investors lose their money when attempting to day-trade and some time or another trader can’t pick a decent long-term investment. Regarding trading, the distinction is for the most part in personal temperament and time. Below are the differences between Day Trading and Investing:
The fundamental differences between day trading and investing are the action levels and position holding times. Day trading includes dynamic management with a short-term holding period, though investing includes latent management with a longer-term holding time horizon as a rule spanning from different quarters to years. Day traders concentrate on short-term trades contained in a single trading day using direct-get to trading platforms. Investors tend to screen portfolio positions periodically from week after week to quarterly through statements and online browser based platforms.
Technical Analysis versus Fundamental Analysis
Day trading relies more on technical analysis using charts and technical indicators. Investing centers more around fundamental analysis including earnings reports, financial metrics, news, and ratios. Fundamentally, day traders are more interested in a stock’s value action, while investors are more centered around the underlying company. Day traders may likewise use for a higher concentration of offers to stash a littler relative value movement value pick up.
Day trading includes more transactions in this way generating more commission expenses, though investing includes not very many trades. A day trader might get in and out of a position different times in a single day, while investors may hold positions for a considerable length of time or years. Along these lines, day traders are more sensitive to broker commissions. To an investor who plans to hold a position for a considerable length of time, a commission is irrelevant. Conflictingly, day traders are getting in and out of positions routinely so commissions can include quick.
Sorts of Stocks
Day traders have diverse criteria than investors when searching for stocks. As said above, day traders are more centered around technical analysis than fundamental analysis. Traders are not very worried about a company long-term potential, management team, and so forth. Rather they are centered solely around value action. Day traders search for stocks with momentum and volatility. This creates the chance to exploit critical value action. It additionally gives the liquidity important to get in and out of positions. Conversely, investors are centered around great companies: companies they accept will develop in the coming years. While volatility is useful to a day trader, it could speak to flimsiness to an investor. Investors tend to search for more secure stocks from more legitimate companies.
Drawback risk can frame from worldwide markets and occasions while stock markets are closed resulting in futures gapping down, which eventually makes most stocks likewise open with a hole down. Investing trusts these are quite recently little hiccups in the general picture of the long-term perspective. The absolute most unstable holdings periods include earnings reports. Long-term investors go for broke amid the earnings season. Open companies are required to give a quarterly earnings report enumerating the condition of business and the earlier quarters execution.
Most companies will likewise give execution projections pushing ahead, otherwise called earnings guidance. Stock’s can respond viciously to the corporate earnings report and guidance. A long time of profits can be lost in a single session for missing consensus analyst appraisals and guidance figures. Investors regularly will choose whether to keep holding a position based on these results where fundamental analysis has a key influence in the basic leadership process.