Investing In ETFs – The Right Way

| February 15, 2012 | 0 Comments

If you’re not already using ETFs to invest, listen up…

I’ve been pounding the table about the benefits of investing with exchange traded funds for years.  The opportunity to make money is just too good to pass up.

In case you missed it, my point is this…

ETFs are the least expensive way for average investors to invest in different segments of the market.

You can easily buy and sell ETFs just like stocks.  Yet, every ETF gives you the diversification of owning multiple stocks like a mutual fund.

ETFs give you the best of both worlds!

Not only that, ETFs also have lower expenses than mutual funds.  And, ETFs are tax friendlier than mutual funds.  With benefits like these, it’s no wonder ETFs are quickly gaining in popularity on mutual funds.

In fact, I can only think of one reason to use a mutual fund instead of an ETF.

A mutual fund’s manager must be able to consistently beat the benchmark.  It’s the only way you can justify paying a mutual fund’s higher expense.

But here’s the thing… Only one in four mutual fund managers were able to beat their benchmark last year.

It was frustrating to see the S&P 500 finish 2011 flat.  But 75% of mutual funds investing in large cap US stocks finishing the year with a loss is just outrageous.

With fund managers coming up short, it’s no wonder we’re seeing money flood out of mutual funds and into ETFs.

According to the ETF Industry Association, ETFs attracted $28.8 billion in new funds in January.  A 200% increase from January of 2011.  And at the same time, nearly $8.0 billion flowed out of mutual funds.

That’s some serious money moving into ETFs… But it’s just the tip of the iceberg.  Mutual funds have a massive amount of money in them.  All together, mutual funds have nearly $16 trillion in assets.

And here’s the best part…

ETFs are the easiest way for investors to get out of the buy and hold game that mutual funds are synonymous with.

The use of ETFs will allow your investments to be more flexible.  And you can easily invest more like institutions.

In other words, ETFs allow you to move your money into the sectors of the economy that are going up and stay away from the sectors that are going down.

In fact, I’ve been showing people how to use ETFs to invest in the hottest sectors of the economy in my Sector ETF Trader newsletter for nearly three years now.

Just this month, we closed out two trades we recommended in December for huge gains.  I recommended the First Trust Biotech Index Fund (FBT) and SPDR S&P Homebuilders ETF (XHB) on December 20th.

We sold XHB for a massive gain of 25% and we sold FBT for an eye-popping 38% return in just six weeks.

No doubt about it, those are huge returns for ETFs.  But they can be found if you know where to look.

And you know what?

I’ve got two new ETF recommendations ready to roll tomorrow in the February edition of Sector ETF Trader.  And they have just as much potential as XHB and FBT.

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Category: ETFs

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets on a daily basis. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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