The Direxion Energy Bear 3X – Triple-Leveraged ETF is designed to yield investment results approximately equivalent to triple (300%) the inverse of the return of an investment in the Russell 1000 Energy Index, which tracks all energy-related securities in the Russell 1000 Index. For example, if the underlying index gains 1%, this fund should decline in value approximately 3%.

Russel Index & Exchange Traded Funds

The Russell Index is one of the most commonly recognized ETFs. (exchange traded funds) There are several products based upon the Russell Indexes. All designed to track subsets of different Russell indexes.

This September there were three new Russel Top index funds introduced by iShares including the 200 Index Fund (IWL), the  200 Growth Fund (IWY), and the Russell Top 200 Value Fund (IWX).

This fund is part of the Russell 1000 and is comprised mostly of highly recognized companies, such as Exxon, Procter & Gamble, and Apple.

The Russell Top 200 Growth Index fund ETFs for trading is comprised of companies that are projected as growth values. (Mostly technology and health care sectors.)

Finally, the Russell Top 200 Value Index that evaluates performance of the largest US stocks with lower growth values and lower price-to-book ratios.

We will see how popular these become in the coming months. Their popularity can be tracked by sorting all ETFs and comparing the average trading volume.

The iShares ETF got its start by Barclays Global Investors and Morgan Stanley. In 2009, Barclays sold iShares to BlackRock, which as of September 2009 consisted of over 180 ETFs.

Investors enjoy ETFs for different reasons. They are actively traded just like stocks and help diversify portfolios. There is a large variety of ETFs based upon international and regional offerings and currencies.

However, one of the most attractive benefits to ETF trading are exchange traded funds low cost. They are less expensive to day or position trade, short sell and trade on a margin account. Add tax exemptions on municipal bonds, and the profits can be even more compelling.

Just remember, ETFs are not magical trading instruments. Like all investments, you must weight the risk/reward and are not suited to new traders with little market experience. Trading ETFs on margin can become even riskier if you are not properly prepared. Knowledge is power – join me every Wednesday evening for free weekly webinars. Click here to join.

Please read about Japanese Candlesticks, in addition to ETF investing, which are the fastest way for new investors to quickly and accurately read stock charts. Once you are comfortable with the major candlestick signals and you know how to read stock charts , expand your expertise by learning the various secondary Candlestick Patterns . Combine these with your favorite Technical Analysis indicators, such as the moving average, and you have the perfect trading arsenal for evaluating stocks, currencies, commodities, or Exchange Traded Funds.

Trading Strategies for ETFs

Each major stock index has exchange traded funds based on them including the American Stock Exchange (AMEX), the Dow Jones Industrial Average, the Standard and Poor’s 500 Index, and the NASDAQ composite. ETF funds are securities that track on an index, a commodity, or a basket of assets like an index fund however they trade like stock on the major stock exchanges. They are growing increasingly popular as more and more individuals invest in ETFs .

In today’s article we will discuss some trading strategies used when investing in exchange traded funds.

Buy and Hold Strategy – This strategy is currently the most common strategy used when investing in the ETF market . More specifically it is the most popular strategy used for profiting from sectors or broad indexes and for limiting portfolio risk. Traders can either choose steady portfolio growth or fixed incomes and they can profit from the growth of all financial products. The diversity of exchange traded funds is the heart of the buy and hold trading strategy.

Active Short-Term Trading Strategy – This is one of the trading strategies that works similar to the short-term trading of equities. Since exchange traded funds have fluctuating prices throughout the day, similar to that of stocks, day traders and swing traders can buy and sell them through the day, or whenever they would like. Trader can also practice short selling exchange traded funds as well! Of course just like with trading stock there are commission fees associated with doing this.

Active Long-Term Trading Strategy – If a trader believes that a currency/market/industry or sector ETF is going to outperform others than he or she can buy more shares of the ETF which tracks it and can then sell the shares of the under performing exchange traded funds. This strategy behaves similar to the buy and hold trading strategy however it includes periodic and perhaps frequent portfolio reshuffling.

ETF’s Wraps – The last of the trading strategies that we will discuss today include that of ETF’s wraps. These are more beneficial than a mutual fund wrap and they are growing in popularity. They are a good investment choice for those investors who prefer a fee-based investment account.

Read about Japanese Candlesticks , a trading strategy used by some of the world’s most successful traders along with other forms of technical analysis . It is the fastest way for new investors to quickly and accurately read stock charts. Once you are comfortable with the major candlestick signals, expand your expertise by learning the secondary Candlestick Patterns . Combine these with your favorite technical analysis indicators, such as the moving average , and you have the perfect trading arsenal for evaluating stocks, currencies, commodities, or exchange traded funds .

ETF Investing – Hedge Investments

Long Term Hedging
Many investors look to exchange traded funds to help them diversify their portfolio by diversifying their overall holdings. This exposes the portfolio to industries and sectors that are represented in the underling index. This diversification spreads the risk in a portfolio across a broad range or industries and sectors which help to mitigate risks associated with undesirable price movements in one single sector or industry. The high liquidity of ETFs makes ETF investing through hedging a great way to mitigate the risk of investments. In fact, liquidity is the most desirable characteristic of ETFs that make them great for hedging.

Short Selling
Short selling is a short-term hedging strategy that works well with ETF funds . Just as the long term hedging strategy discussed above can help to mitigate risk associated with undesirable price movements, so can short selling, except with short selling it is done in a much more direct way. Many investors will take a short position when ETF investing in order to reduce or get rid of the exposure of their portfolio in those sectors that they anticipate weakness. How this works is that a drop in a portfolio’s value as a result of price change in an underlying stock, is offset by a short position in the ETF as the ETF’s price drips. Highly liquid ETFs help to facilitate this ETF trading strategy because as the market rebounds, short positions can be closed out and the investors can take full advantage of the growth in those sectoas that were previously weak.

Derivatives
In the ETF market , some ETFs have derivatives connected to them. These can include put options that can protect against undesirable price movements by locking in a current sell price in the anticipation that prices will fall. It can also include selling futures contracts on an ETF when ETF investing. Basically, when exchange traded funds have more derivatives tied to them there are even more opportunities available to investors to mitigate risk using hedge investments.

Please read about Japanese Candlesticks , in addition to ETF investing, which are the fastest way for new investors to quickly and accurately read stock charts. Once you are comfortable with the major candlestick signals and you know how to read stock charts , expand your expertise by learning the various secondary Candlestick Patterns . Combine these with your favorite Technical Analysis indicators, such as the moving average , and you have the perfect trading arsenal for evaluating stocks, currencies, commodities, or Exchange Traded Funds.

ETF’s vs. Mutual Funds

In today’s article we discuss the basics of both exchange traded funds and mutual funds as well as the advantages of both types as funds. As explained in recent articles ETF funds are simply investment portfolios that consist of multiple securities that trade like stocks. These securities are designed to track the performance of an index such as the S&P 500. The ETF market has grown considerably since introduction into the market back in 1992 and there are currently over 1,000 ETF funds available. The silver ETF , the gold ETF , the agriculture ETF and the currency ETF , just to name a few, are all available for trading. This market continues to grow and is a great market for investors who are looking to invest in more specialized securities.

Mutual funds are simply a collection of investments designed to reflect the performance of the underlying holdings, they may have widely contrasting portfolios and may not track a specific index. The main difference between mutual funds and exchange traded funds is that mutual funds only trade once a day whereas exchange traded funds continuously trade like stocks all day while the markets are open. Also, their fee structure is different. ETFs are more straightforward while mutual funds have numerous ways to charge the investor.

Advantages of Exchange Traded Funds Include:

1. Liquidity – this is liquidity is due to the fact that they can be traded like stocks multiple times throughout the day, also allowing limit and stop loss orders.
2. Tax Advantage – ETF funds are capital gains tax friendly, often never even issuing a capital gains distribution, unlike mutual funds. When they due issue a capital gains distribution they are typically minimal.
3. Low Ownership Costs – the recurring fees are very low due to their structure.
4. Options – more sophisticated investors buy puts and calls or create spreads to hedge their investments on the corresponding options.
5. No Minimum Investment – many mutual funds require a large sum of money as their minimum investment where ETFs do not and you are only limited by your own financial limitations and the price per share.

Advantages of Mutual Funds Include:

1. Dividend Reinvestment – dividends for mutual funds can be set up so that they automatically reinvest back into the fund unlike exchange traded funds.
2. No Commissions – there may only be an initial fee and you can make purchases without being charged like you would if you were buying an ETF or stock.
3. Pricing Surprises – there can be surprises with exchange traded funds since the share price may fluctuate throughout the day whereas with mutual funds, there is one price at the end of each trading day.
4. Share Classes and Breakpoints – there are different share classes such as front-load and back-load that allow flexibility in how the funds are purchased (for those investors who do invest in load funds). Breakpoints are also on fees that have a certain amount into one specific fund company.

Read about Japanese Candlesticks as well which is a trading strategy used by some of the world’s most successful traders along with other forms of technical analysis . It is the fastest way for new investors to quickly and accurately read stock charts. Once you are comfortable with the major candlestick signals, expand your expertise by learning the secondary Candlestick Patterns . Combine these with your favorite technical analysis indicators, such as the moving average , and you have the perfect trading arsenal for evaluating stocks, currencies, commodities, or ETFs.

An international ETF is an exchanged traded fund that invests in foreign-based securities while lowering exposure for investors. When investing in this type of exchange traded fund, you can invest in a specific region or in a specific economy. Either way, these types of ETFs are popular because they are fairly inexpensive to trade and they are fairly liquid. The international ETF has taken off as a result of globalization as well as advances in financial regulation. These factors and others have opened up the ETF market to outside investments. It is important to note, however that while exchange traded funds in general are relatively inexpensive investments (when compared to other types of investments) the international ETF is more expensive than the average ETF. This is of course due to the higher cost to invest abroad.

Many investors see investing in an international ETF as a way to diversify their investment portfolios. This is due to the constant fluctuations that take place in a country’s economy. Investors understand that if they buy securities and ETF funds in other markets in addition the U.S. markets, that they can decrease the effects that a country’s economic problems could have on their portfolio. It is important to understand however, that by investing in only one country at a time, you are not lowering your risk and in fact you are overly exposed. Investors must ensure that they spread their risk among many countries at a time.

The majority of investors will invest in an international ETF in Japan and/or the United Kingdom, in addition to the United States. These are both developed nations but investors must be sure that they have a complete understanding of both economies since both Japan and the United Kingdom’s economies move in conjunction with the U.S. equity markets. Again, this plays to the fact that you must diversify your portfolio by investing in ETF funds across multiple economies. This is one of many ETF strategies that investors opt to utilize. In fact many investors will capitalize on gaining international exposure by investing in foreign currency ETFs .

Read about Japanese Candlesticks , a trading strategy used by some of the world’s most successful traders along with other forms of technical analysis . It is the fastest way for new investors to quickly and accurately read stock charts. Once you are comfortable with the major candlestick signals, expand your expertise by learning the secondary Candlestick Patterns . Combine these with your favorite technical indicators , such as the moving average , and you have the perfect trading arsenal for evaluating stocks, currencies, commodities, or other exchange traded funds like the international ETF.

Many investors consider the energy ETF to be a solid investment for your investment portfolio if you are looking to invest in the energy sector. In today’s article we discuss reasons why you may consider the energy ETF as one of your ETF strategies .

Hedge Energy Exposure – energy exchange traded funds can provide protection for your downside. When selling ETFs your energy investments may lose on a decline, but your short energy ETF position can create gains to help offset the losses. You can put on a short position by buying an inverse ETF as well. This may help out if you are having problems selling ETFs. Inverse exchange traded funds move in the opposite direction of their correlating investment vehicle. You don’t have to sell them however because they are used to create a short position on the buy transaction.

Exposure to Energy Commodities – this is an option for those investors who want exposure to the energy sector as a commodity but don’t want to invest directly into energy companies. An energy commodity ETF can provide the investor the exposure to the actual commodity and not the companies that are involved.

Exposure to Energy Companies – the energy ETF allows investors to have exposure to certain companies without having to buy a lot of stocks. This can cut down on the commissions and buy orders as well because with just one trade you can quickly add 13 or more stocks to your portfolio with one transaction.

Hedge Against Inflation Risk – investors are finding that not only are currency ETFs a good hedge for the dollar but that energy exchange traded funds are good as well. Energy seems to do well even during times of crisis even though you still experience ups and downs. Energy really proves to be a pretty sound commodity. There are also great tax benefits in the ETF market as well that investors should look into.

Portfolio Diversification – the energy ETF can help to diversify your portfolio without requiring you to buy a lot of future, commodities, or energy equities. Ensure that all of your risk is not tied to one sector so that you have something offset your losses.

Read about Japanese Candlesticks , a trading strategy used by some of the world’s most successful traders along with other forms of technical analysis . It is the fastest way for new investors to quickly and accurately read stock charts. Once you are comfortable with the major candlestick signals, expand your expertise by learning the secondary Candlestick Patterns . Combine these with your favorite technical indicators , such as the moving average , and you have the perfect trading arsenal for evaluating stocks, currencies, commodities, or exchange traded funds.

ETF Strategies (Exchange Traded Funds)

Investing in exchange traded funds is a great way to diversify your portfolio and to increase market exposure. ETF funds are securities that track on an index, a commodity, or a basket of assets like an index fund, but that trades like stock on the major stock exchanges. In today’s article we discuss some ETF strategies that investors use as part of their investing strategy in the ETF market .

Industry Exposure – Investors can purchase industry exchange traded funds that follow indexes for specific market sectors. Investors will do this typically in those industries that show potential growth. See sector ETF .

International Exposure – Investors can purchase foreign exchange traded funds in order to gain exposure to international markets that show potential growth and that follow an index for specific countries. Many investors will gain this international exposure as well by investing in foreign currency ETFs .

Managing Risk – Investors will hedge against risk by short selling an exchange traded fund in a specific sector and they will also take the opposite position with a correlating exchange traded fund to counter their risk as well.

Portfolio Management Transitioning – ETF strategies also include the buying or selling of a short-term exchange traded fund during the transition period that occurs when a portfolio manager changes positions or leaves a financial firm. Liability of your portfolio changes and many see this as a way to balance any risk exposure.

Cash Flow – All investors experience periods of excess cash flow and cash flow deficit. During those periods of excess cash flow many investors will use any extra money to purchase short-term exchange traded funds. These funds are easily liquefied within one single trade in the event of a cash flow deficit.

Price Inconsistency – When ETF trading , many investors know how to take advantage of volatile market conditions such as interest rates and currency. It requires careful consideration but exchange traded funds investors often know how to take advantage when price differences among an index and its derivatives contracts occur.

Market Analysis – Proper market analysis is one of the ETF strategies that investors must conduct. Those investors that invest in exchange traded funds can take advantage of numerous trading strategies as long as they know how to conduct thorough market analysis.

Read about Japanese Candlesticks , a trading strategy used by some of the world’s most successful traders along with other forms of technical analysis . It is the fastest way for new investors to quickly and accurately read stock charts. Once you are comfortable with the major candlestick signals, expand your expertise by learning the secondary Candlestick Patterns . Combine these with your favorite technical indicators , such as the moving average , and you have the perfect trading arsenal for evaluating stocks, currencies, commodities, or exchange traded funds.

Before explaining what an inverse ETF is we should first explain what a derivative is. A derivative is a security whose price is dependent upon or derived from one more underlying assets and its value is determined by fluctuations in the underlying asset. The inverse ETF is an exchange traded fund that is created by using a variety of derivatives for the purpose of profiting from a decline in the value of an underlying benchmark. When ETF trading , with this type of ETF, it is similar to holding various short positions.

It is a little different, when shorting these exchange traded funds, because you don’t have to open a margin account. You are not actually selling anything short but you are instead buying on the anticipation of a downturn. This also means that any costs involve with selling short are avoided as well. Basically, this ETF market is for those investors, who are interested in outperforming traditional market benchmarks, hedging their portfolios against market risk, or maximizing investment returns no matter the condition of the market.

When investing in ETF funds of this nature, you can focus on a specific sector, such as energy or financials. The inverse ETF, also known as a short ETF or a bear ETF, is unique in nature in that is uses derivatives. There are many trading strategies used when investing or trading in derivatives such as directional, non-directional, arbitrage, hedging and more.

If this sounds confusing, many investors actually find investing in the inverse ETF to be quite easy. For example, if you are bearish in a specific market, industry, or sector, you would simply buy shares in the corresponding exchange traded fund. You would then place an order to sell once you think the downturn is over. This of course still requires the investor to correctly forecast the market in order to make any money.

Read about Japanese Candlesticks , a trading strategy used by some of the world’s most successful traders along with other forms of technical analysis . It is the fastest way for new investors to quickly and accurately read stock charts. Once you are comfortable with the major candlestick signals, expand your expertise by learning the secondary Candlestick Patterns . Combine these with your favorite technical indicators , such as the moving average , and you have the perfect trading arsenal for evaluating stocks, currencies, commodities, or exchange traded funds.

Please continue your exchange traded funds education and read about ETF strategies .