26. Index Funds And Etfs
I’m not attempting to beat around the bush with you. Trust me on this, I am basing this on my experience.
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Commodity ETFs (exchange traded funds) seem to be doing well, but agriculture ETFs are doing better than well. Over all of the exchange traded funds on the market one in particular is flying high. PowerShares DBA ETF has shown more than 50% return since January, 2007, when this ETF was introduced. During the same period S&P 500 was down more than 5%. DBA is one of several agriculture ETFs out there and they all seem to be performing.
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There seems to be a trend that agriculture exchange traded funds goes up when stock market declines, according to the analysts. Based on this performance, would hedging your portfolio with agriculture ETFs make sense? That really depends on your prediction of the stocks you own and whether you think they are doing well enough on their own. If you see the stock market in decline, it may be worth your while to take a look at commodity ETFs, particularly agriculture.
Supply and demand for agricultural products is the key to why these commodity ETFs are doing so well. The demand for crops around the world, particularly in China and India is very high, and they are getting their supplies shipped in because they cannot keep up or they are predicting a future need. China has the Olympics coming up and have been seemingly stocking up on wheat. Better health education around the world is causing a higher demand for grains. Corn is on the rise for feed. Even sugar is in higher demand, maybe because of the effect recent weather has had on global crops.
Agriculture ETFs are about predicting the future and the experts are seeing this rise in agriculture exchange traded funds as ongoing. Consumers might not be happy about the price of oil causing the rising costs at the grocery stores. Nobody wants to see that these crazy weather anomalies seemingly caused by global warming causing so much disaster. But commodity agriculture ETF investors are certainly able to look at the silver lining in these clouds.
Even the analysts cannot predict the future, though some of them seem to do a pretty good job of trying. But they are saying that the future looks good for commodity ETFs, and agriculture exchange traded funds in particular are getting an expert nod. If you got in on the agriculture game by purchasing some DBA exchange traded funds back when it was introduced in January, 2007, then you already know what an agriculture ETF can do for your portfolio. If you haven’t given commodity ETFs a try yet, maybe now is the time.
You are the only one who can decide which investments are right for you. Only you know what your portfolio looks like and whether the ever dropping S&P 500 is doing for you and whether you need something in there that will counteract it. Take the time to study up on agriculture exchange traded funds. They could be the boost your portfolio needs. You may not have to be as concerned about your other stocks if you have some commodity ETFs to back them up.
Watch the video related to etfs
Passively managed funds are index funds – funds that aim to hold securities in exactly the proportion that they are held in within an index and that typically have significantly lower fees that actively managed funds. These products offer market exposure at lower cost – so do ETFs.
Help answer the question about etfs
Tags: Agriculture Etfs, commodity etfs, course, etfs, FOREX, Market, stock, trading
February 18th, 2010 at 9:54 pm
How do I put my money in Index fund?
February 18th, 2010 at 10:10 pm
Thanks for Question – answered more fully on saving and investing forum – v limited space here!
Increasingly common – Fund mgmt cos like Fidelity offer them – Vanguard built business around index funds and benefits. Online brokers like Schwab and ETrade offer; comm banks like Citi offer them. Contact and get details or check out sites. Always check fees & bear in mind dollar cost averaging, tax issues (ie using 401k etc), diversification, impact of time, time horizon (lots more also in book).
February 18th, 2010 at 10:35 pm
You can short the TLT if you want to bet long term interest rates will go up.
Alternatively, you can buy TBT. That is you take a long position on TBT to get the desired effect. TBT is double-short long bond ETF. That is, the return you get on this ETF is the same as that of taking a leveraged short position on long-term bonds.
February 18th, 2010 at 10:57 pm
Yes, that is part of it. Corrolation to the spot price depends on the combination of trade in the futures, options, or stock of companies in or related to the commodity. Also depends on whether it is a ETF or an ETN. The UNG is an ETN and it is being discontinued within the next couple days because it has preformed poorly.
February 19th, 2010 at 12:38 am
I don't believe Fidelity operates any ETFs. You can buy and sell ETFs through your Fidelity brokerage/retirement account. iShares is one of the biggest ETF providers.
QQQQ looks very interesting and has returns near or better than Contrafund (FCNTX). FCNTX seems to perform better in bear markets, QQQQ a slight bit better in neutral and bull markets.
February 20th, 2010 at 1:35 pm
Another consideration is that ETF's can be bought/sold like stocks. There is no "holding period" as required by many mutual funds that you purchase through a brokerage account or direct from the mutual fund company. So if the ETF sector is heading down (eg. real estate VNQ), you can get out by simply selling your shares.
February 21st, 2010 at 3:33 am
History establishes a trend and gives cues as to how the market HAD dealt with the company in regard to things that went on. It does not directly bear on the future any more than if the previous coin toss were heads. As in the coin, there is still a 50-50 chance on either heads or tails (although I have had a few land on edge, they eventually fell one way or the other). What the market DID (past tense) does not require the market to do it again.
Still, check for major events and trends. Does your stock tend to go up when the Dow goes up? Or may be it goes the other way (as in folks would rather buy a popular blue chip than buy this company when they are in a buying mood)? Or is there any common correlation (often not)? Is your stock seasonal? My first purchases were for an air conditioning manufacturer, so I bought when it was cheap, Winter, and sold when it was higher, early to mid-Summer. If your company, say, made hot chocolate, it would have a different season than it it, say, sold snow cones. Has your company done a lot of ups and downs but within a fairly steady corridor? Then there are reasons why the market may have established a ceiling and a floor, so ferret out some ideas for those price supports or resistance. Similarly, if you can discern other characteristics that frequently happen, you've just been handed an opportunity to improve your odds–if your coin tosses have never gone more than one side four times in a row, for instance, I would bet for the other side, even if the actual odds for that specific toss were still only 50-50. If your stock tends to peak in January, April, and August, then look at your calendar and time your purchases, or sales, with that in mind, even if you haven't figured out the common causes. History, therefore, gives hints and clues. The market, however, doesn't have to bow to history. In that you are on your own.
Still, there is another important history. It involves comparative advantages. Does your company tend to make more profits than its peers? Does your company tend to make more profits more consistently than its peers? Does your company look like it will continue to perform this way? (If not, then look more closely at its peers) Profitability tends to win out over hope and hype in the long run, so look at its history of doing business, and let the market do whatever it wants.
The first is trading. The latter is investing. What are you really wanting to do?
February 21st, 2010 at 8:12 am
I use Scottrade and have been very satisfied. They have a good trading platform and customer service. They are cheaper than Etrade.
I'm not familiar with Zecco, other than looking at their website. But based on your question, you won't need much in the way of service. They could be a no cost way to trade ETFs. I have noticed a number of questions about them which can indicate a customer service problem. Look their site over and see what you think.
February 22nd, 2010 at 2:33 am
etfconnect.com lists all by family. best resource available.
February 22nd, 2010 at 4:02 am
If you want to short the market, then you need to sell individual stocks or widely traded ETFs like DIA or SPY short. Bear ETFs don't actually work the way they are described. Due to technical difficulties in the structure of the ETFs they don't always exactly mirror the market that are supposed to. In the big market drop a year ago, many bear funds experienced liquidity problems and the price of the ETF went down even though the underlying index was going down. This meant that people who predicted that the market was going down lost a lot of money even though they were right.
Moral of the story: if you want to go short, then go short; don't look for gimmicks.
February 22nd, 2010 at 5:36 am
It depends.
If you plan to make a one time deposit, ETFs.
If you're making monthly deposits, funds.
If you're somewhere in between, it depends on the commission you'd pay to your broker to buy the ETF.
One warning, not all brokers let you buy ALL funds for free. Check with your broker first.
April 26th, 2011 at 12:50 am
The Trend Is Your Chum With Commodities ETFs That is another old investing proverb that you have doubtless heard 1,000,000 times, but being on the right side of the trend is always crucial, particularly with commodities.
January 8th, 2012 at 12:09 am
So what’s the benefit of owning stocks in a commodity matched against the reciprocal futures contract? As we have highlighted, commodity ETFs seriously lessen your risk exposure. So be sure a positive trend is forming in the commodity you are considering before diving into its corresponding ETF.