The Facts Regarding Exchange Traded Funds Explained
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One of the most popular Exchange Traded Funds, the NASDAQ 100 Trust, known as the cubes, may be soon having some strong competition. The cubes (QQQQ) have been the default Fund for the tech industry. This may be about to change.
A new exchange traded fund due to be introduced next year is being planned by Archipelago Holdings Inc. This ETF will cover the technology sector; however it is covering the technology sector with a twist. Current technology funds give technology companies weight in the index based on market capitalization. Companies with large market capitalizations such as Microsoft would have a larger influence on the index. For example many technology indexes give Microsoft a 10% or more weight in the index.
Archipeligos’ new index will be price weighted. Companies with the highest price will be given more weight in the index. By this method Microsoft may only have a 1% weight in this new ETF while Genentech would make up 3.3% of the index.
Another difference is this new fund will have a 25% investment in healthcare companies, which are outside the traditional tech sector. The highest priced issue in the index will be Genentech. Genentech will have the greatest weight in this index.
This new fund will be very similar to an existing index. This is the ArcaEx Tech 100 index. Over the past five years the ArchEx Tech 100 index has trounced the performance of the QQQQ. Over this period the QQQQ has shed about 10% a year, while during the same period of time the ArcaEx Tech 100 index has only shed about 2.4% a year. This is primarily due to the smaller cap stocks that make up the index and the fact it includes 25% investment in the healthcare industry. This performance alone is bound to attract a lot of attention and competition for the NASDAQ 100 Trust.
The QQQQ has about $1 Billion invested. If the new fund gets even only 5% of that it will be a billion dollar fund right out of the gate. This new fund is due to be introduced in early 2006, pending approval by the SEC.
Watch the video related to exchange traded funds
www.lucky-dog-investing.com explains exchange traded funds.
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Tags: Arca, Archipeligo, Cubes, exchange, Exchange Traded Funds, funds, Index Funds, Nasdaq 100 Trust, traded
November 1st, 2009 at 10:17 pm
Thanks for the video… these ETF are trading like mad now adays… Please stop with the camera zooming however.. makes it difficult to watch the video
November 1st, 2009 at 10:30 pm
An ETF is like a mutual fund that can be freely traded on the stock market. With mutual funds, there are specific times through the year that you can deposit or withdraw money without incurring a penalty fee. ETF's do not have these penalties.
ETF's usually track some type of index whether it be an entire market (like QQQQ does) or a just sector of a market (like XLF does). The company that issues the ETF buys and holds shares from companies that make up the underlying index on the basis of the market capitalization of each company in the index. That means that the ETF owns more shares of a company that makes up a bigger part of the index. Leveraged ETF's use options and other derivatives of a company's shares to increase the gains, and losses, of the underlying index.
I prefer ETF's to an individual company's stock because the ETF, by it's nature, is diversified. You won't make as much as you would from owning an individual company that produces a huge gain on good rumors or news, but you won't lose as much on a huge loss from bad rumors or news on the specific company.
Be very, very careful with leveraged ETF's. They can cause huge losses very quickly, and are not good for long term (months to years to forever) investing due to the way they work. In fact, I would suggest staying away from leveraged ETF's unless you have a lot of experience in trading (which is different from investing) and fully understand the risks involved with the use of leverage.
If you want a "safe" ETF, I would suggest a market index ETF that tracks one of the major markets like the NASDAQ, NYSE, or AMEX. But remember, there is no such thing as a truly "safe" investment; some just carry less risk.
November 1st, 2009 at 11:10 pm
1) you (the IPO investor) give your money to someone and tell them to buy gold for you
2) they buy gold
3) they charge you a fee to warehouse the gold
4) you sell your stake to someone else
etc.
November 2nd, 2009 at 11:25 am
1, Obviously the Turkish Lira will appreciate against the dollar.
2. They will slightly decrease the trade balance or not affect it at all.
November 3rd, 2009 at 1:53 am
They are really just saying "…a portfolio of the stocks…" in a more inclusive way to allow for changes in the make up the S&P 500 index to include other forms of ownership while still excluding bonds and other forms of credit.
November 3rd, 2009 at 11:57 pm
I first want to commend you for already realizing one of the most important elements in trading Forex…..only risk money that you can afford to lose.
A few of my students are using micro accounts with GFT and this may be perfect for an account the size of yours.
I like to utilize conservative strategies that reduce market risks, generate an interest payment everyday and minimize the amount of time it takes to manage one's account (about 30 minutes per week).
I have two suggestions for you….first spend some time at babypips.com for some very good Forex information presented in a very enjoyable format. Second, I would be happy to send you an investment guide that will explain a couple of the strategies that I use. Just drop me an email.
Best wishes for your success.
Paul Upp
(925) 236-1839
August 14th, 2011 at 10:12 am
ETFs offer reduced tax liabilities when it comes down to taxable gains.
October 14th, 2011 at 5:08 pm
Instead of making an attempt to pick the one stock which will prove lucrative, buying an ETF that concentrates on that industry can provide you with that exposure while lowering the risk. ETFs don’t purchase or sell stocks.