Tag Archive | "ETF Securities"

Trading ETF Securities


The Risks Associated With Trading ETF Securities

ETF SecuritiesExchange Traded Funds (ETFs), also known as ETFs or ETF securities, have garnered a lot of interests from stock, bond, and commodity traders because ETF securities have opened up a lot of trading options that previously were not available to traders.  While on balance, it is beneficial to have additional trading options via ETF securities, there are risks associated with trading ETF securities that should not be ignored.

Even if one trades ETF securities and has no intention of holding ETF securities for longer than a few minutes to a few days, it is still very important to read the ETF securities prospectuses to understand how ETF securities derive their valuation and the risks associated with holding ETF securities.  This is because value of ETF securities can change substantially at times, due to the nature of how they are valued.  Uninformed traders expose their trading accounts to unnecessary trading risks when they do not fully understand how ETF securities derive their value and the market forces that can affect the price of ETF securities.

Leveraged ETF securities that trade at two or three times the market sector or financial products that they track can be both highly profitable and highly risky to trade.  While trading leveraged ETF securities is enticing to traders looking to maximize profits, the risk of excessive losses should also be kept in mind, if the trade does not work out as expected.

To limit the potential for losses while trading ETF securities, trading capital protection methods should be employed when trading ETF securities.  Trading capital protection methods include using stop loss orders to automatically sell when certain loss levels are reached and limiting the amount of capital dedicated to trading individual ETF securities to limit exposure to the price action in ETF securities.

The Potential Rewards Associated With Trading ETF Securities

There are potential financial rewards associated with trading ETF securities that draw many traders to use ETF securities as trading vehicles.  Unlike mutual funds, which update their prices at the end of the trading day, ETF securities continually update their pricing throughout the trading day, based on the Net Asset Value (NAV) of the underlying securities on which their prices are based.

ETF securities essentially trade like stocks, which allows traders to take advantage of stock trading strategies and use stock trading tools.  ETF securities can be sold short to short segments of the stock market or asset classes that appear to be overvalued in the short term.  ETF securities can also be purchased using a margin account, which can be used to increase the amount committed to a trade that has great profit potential to increase trading profits.

Leveraged ETF securities that are available for some stock market sectors and financial products can be utilized by traders to get the most bang for their trading buck, especially when a low risk trading opportunity presents itself and a stock market sector or financial product appears poised to make a move higher or lower.  Many ETF securities, including leveraged ETF securities, have counterpart inverse ETF securities that make trading the short side of a trade easier than ever.  All an ETF trader has to do to go short is buy inverse ETF securities.

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Investing In ETF Securities


The Risks Associated With Investing In ETF Securities

ETF SecuritiesExchange Traded Funds (ETFs), commonly referred to as ETFs or ETF securities, offer a wide range of investment options for investors looking to invest in stock markets around the world or to diversify their investment into asset classes beyond stocks.  ETF securities’ holdings (what they invest in), that provide ETF securities their valuation, can differ greatly amongst the many ETF securities, which can affect the risk and potential returns associated with investing in ETF securities.

Some ETF securities invest in similar financial instruments as mutual funds, such as stocks and bonds.  Other ETF securities offer investments in much riskier financial products that cannot be invested in via mutual funds, such as volatility futures.

While mutual fund prospectuses are relatively easy to read and understand, this is not always the case with ETF securities prospectuses, due to the complicated nature of their holdings and valuation methods.  It is very important that an investor considering investing in ETF securities read the prospectuses to gain a clear understanding of how the ETF securities derive their valuation and the risks associated  with holding particular ETF securities.

Some ETF securities, such as leveraged ETF securities, are not suitable for long term investment purposes, due to their leveraged exposure to a stock market sector or financial products, which leaves an investment portfolio exposed to the risk of excessive losses.

The potential for natural decay in the price of the ETF securities that invest in futures contracts, due to the nature of futures contracts investing, make ETF securities that invest in futures contracts risky for long term investment purposes.  If the commodity or index that the futures contract is based upon loses value, the losses in the corresponding futures based ETF securities may be much greater than the actual loss of value of the underlying commodity or index.

The Potential Rewards Associated With Investing In ETF Securities

The potential rewards associated with investing in ETF securities include the ability for long term investors to make targeted investments in stock market sectors around the world and in various financial products to diversify investments across a number of regions and asset classes.  ETF securities provide long term investors numerous investment options to make targeted investments.  For example, if an investor thinks that investing in gold is good long term investment, they can invest directly in physical gold or gold futures contracts via ETF securities, rather than buying a mutual fund that invests indirectly in gold producing or related companies.

ETF securities provide an easy way for long term investors to diversify their investment portfolio across a number stock market sectors, regions, and asset classes.  Targeted investments can be made via ETF securities in specific stock market segments, such as wind energy, or specific countries, such as Brazil.  Additionally, ETF securities are available for a number of assets classes, including:  stocks, bonds, commodities, and real estate.

ETF securities generally have lower maintenance fees than mutual funds, due to the reduced cost structure associated with ETF securities, which make ETF securities attractive to long term investors looking to keep more of their profits over the life of their investments.

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ETF Securities: Changing The Way We Invest In Precious Metals


ETF Securities: A Different Kind Of ETF Sponsor

ETF SecuritiesIf you were going to have a conversation about ETF issuers, there’s a decent chance that London-based ETF Securities might be left out. That’s not surprising, at least not when it comes to U.S. ETF sponsors. There’s about $1 trillion in ETF assets under management in the U.S., but over $800 billion of that total is held by just three firms – iShares, State Street Global Advisors and Vanguard. As of the end of September 2011, ETF Securities had $3.7 billion in AUM across seven U.S.-listed funds, according to data from the National Stock Exchange.

That may not sound like much, especially compared to one of the big boys like Vanguard or iShares, but a few yeas ago, ETF Securities was completely unknown in the U.S. ETF Securities changed that with a combination of good timing and the right offerings. Now, it appears this upstart ETF sponsor is here to stay.

ETF Securities: Gold, Silver and More

When it comes to investing in ETFs backed by physical holdings of precious metals, investors usually flock to the SPDR Gold Shares (NYSE: GLD) and the iShares COMEX Gold Trust (NYSE: IAU) for gold and the iShares Silver Trust (NYSE: SLV). And these are exactly the arenas that ETF Securities competes in.

In fact, the ETF Securities Physical Silver Shares (NYSE: SIVR) does the exact same thing as SLV with an expense ratio that is 20 basis points lower. ETF Securities also offers two gold ETFs: The ETFS Physical Swiss Gold Shares (NYSE: SGOL) and the ETFS Physical Asian Gold Shares (NYSE: AGOL). What makes these ETFs different from GLD or IAU is that they store their gold overseas. In the case of AGOL, the gold is stored in Singapore.

Why consider an ETF that stores its gold in Switzerland or Singapore? Just look at the history books. While it may never happen again, the U.S. government once seized physical gold from private citizens. If that happened again, gold from ETFs would be seized, but Uncle Sam can never seize gold stored outside the U.S.

First-To-Market Brought To You By ETF Securities

Showing that it is more than just a copycat ETF issuer, ETF Securities was the first ETF firm to introduce funds backed by physical holdings of palladium and platinum to U.S. investors. Those funds are the ETFS Physical Palladium Shares (NYSE: PALL) and the ETFS Physical Platinum Shares (NYSE: PPLT).

And in another testament to the unique offerings of ETF Securities, the firm offers an ETF with exposure to all four precious metals, the ETF Physical Precious Metals Basket Shares (NYSE: GLTR) and an ETF that holds just the white metals, the ETFS Physical White Metals Basket Shares (NYSE: WITE).

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