Understanding Exchange Traded Funds

ETF vs. Mutual Funds

A few years ago there were only a handful of Exchange Traded Funds. Today there are over 900 ETFs covering many different segments of both the domestic and foreign markets.

Exchange Traded Funds:

• Are listed on the various stock exchanges and trade just like a stock
• They are priced continuously throughout the trading day
• ETFs can be sold short
• You pay a commission when buying and selling just like when buying an individual stock.

ETFs offer all of the advantages of a mutual fund without some of the disadvantages:

• Diversification:
  A typical ETF will hold many individual stocks within its portfolio.
• Professional Management:
  ETFs are managed by highly professional investment specialist that make the buy and sell decisions for their individual ETF portfolios.
• Economies of Scale:
  ETFs take advantage of their size to minimize transaction cost associated with buying and selling individual stocks within their respective portfolios.
• Advantages over Mutual Funds:
  With ETFs there are no minimum holding periods and no early redemption fees.

Types of Exchange Traded Funds:

• Growth oriented (Smaller growth stocks)
• Value oriented (Large cap value stocks)
• Income oriented (Bond funds or dividend paying stocks)
• Specific country focused (China, Singapore, Germany, etc.)
• Regional focused (Latin America, Europe, Asia, etc)
• Foreign exchange (Forex related vs. the U.S. Dollar)
• Specific market segments (energy, health care, consumer products, etc.)
• Precious Metals (Gold, silver, etc.)
• Inverse ETFs (Go up when the market is going down.)

Rebound Trading Systems

With so many diverse ETFs to choose from it is important to have a sound system for building a portfolio of Exchange Traded Funds.  These robust trading systems consistently out-perform the S&P 500 by a wide margin.  Click below to learn more about how our trading systems teach you how to invest in ETFs:

Rebound Mutual Fund Trader

Rebound ETF

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