Making Money Alert
The Year Of The ETF
12/14/2006
This year it seems as though the rest of the world has caught on to what I've been saying for years regarding exchange-traded funds (ETFs). Let's take a quick look at the numbers and you'll see what I mean.
At the end of 2005, there were a total of 221 ETFs in the market.
With about two weeks to go in 2006, the total ETF count now is 369.
That's a whopping 148 new ETFs added to the market in just over 11 months. That's growth my friends, and that growth doesn't surprise me one bit.
I must say that if there is one thing Wall Street is really good at, it's creating products that will sell. Sometimes these products aren't very good. Other times, they hit the mark big time. The latter situation occurred with the rollout of many new ETFs this year.
I remember earlier this year when we saw some investment gurus crying foul about the number of ETFs now available. Obviously, these people aren't big advocates of low cost, objective management, transparency, ease of trade and good performance. I say that because, by and large, those are the qualities you get when you opt for an ETF.
Of course, not every ETF is a winner, just like not every stock is a winner. Many ETFs failed to do very well this year. Still, I think when the final numbers for the year are tallied, ETFs will have outperformed the majority of their mutual fund counterparts.
The above table lists what I think are some of the best ETFs to come to the market this year. Now when I say best, I am not talking strictly about performance. I am talking about the most interesting, i.e., the biggest and best new twists in ETF land.
First off, we have a slew of bear market ETFs now available to us. These ETFs move the inverse of the major indices, so if the Dow, S&P 500, Nasdaq 100 or S&P MidCap 400 are getting crushed, these funds are jumping for joy.
Another great category to emerge this year is the leveraged ETFs. If you feel like swinging for the fences, there's no better way to do so than to get twice the performance of a major stock average. Of course, with added leverage comes added risk. But used judiciously, these leveraged ETFs can really boost your overall performance.
Another new twist on index investing is the equal-weighted index ETFs. Rather than delivering a market-capitalization weighted return, such as those tracked by most major index ETFs, the equal weight ETFs spread out their investment equally in each company. This equal weighting offers less exposure to volatility than traditional equity index ETFs do, and that means they are good choices for the long term.
Finally, we saw the emergence of some very narrow sector ETFs this year. These are ETFs that take advantage of specialized sectors such as oil, gold, silver, private equity and even insider trading. You gotta love the innovation here with these funds. Given the right market conditions, I definitely think these narrow sector funds can help investors make some nice money.
Using this rich bouquet of new ETFs to make BIG profits is what my ETF TRADER service is all about. In fact, we've used several of these newly minted ETFs to capture double-digit percentage gains, in some cases, in as little as a few weeks.
Want to find out more about how to put these unique ETFs into your investing stable? If so, please click on the link below for my special ETF Trader offer.
Click here to learn more about ETF Trader
SECRETS TO VARIABLE ANNUITY SUCCESS 9
When it comes to variable annuities (VAs), I have what could be described as a classic love-hate relationship. I love VAs because they are a great tool to help you enhance your retirement nest egg. They offer unlimited contributions -- a great benefit for those who receive some type of windfall such as inheritance, a life insurance payout or a big settlement. You also can get the benefits of active portfolio management, plus you can select your own type of income stream payout, such as a lump sum or a monthly distribution.
I hate VAs because, so often, they are used by unscrupulous brokers who charge outrageous commissions to gullible investors who often are unaware of what exactly they are buying. Also, I hate when IRAs are put in a VA, because there simply is no reason for a tax-sheltered investment to be placed inside another tax-sheltered investment. Finally, I hate two popular VA strategies, buying-and-holding your investments without regard to market conditions, and the so-called "index" annuities, which make promises of performance that they may not be able to make.
So, how do you put the love on your side and how do you minimize the hate when it comes to VAs? Well, that's exactly what I cover in my online seminar, The Secrets to Variable Annuity Success. If you want to find out more about these great retirement investing tools, I encourage you to check out my seminar by clicking here.
I guarantee that after this seminar you'll be up to speed on the essentials of smart variable annuity investing.
WHAT'S THE FED GOING TO DO NEXT?
On Tuesday, Mr. Bernanke and his merry band of central bankers decided to leave interest rates unchanged for the fourth-consecutive Federal Open Market Committee meeting. The decision wasn't at all surprising, since many economists on Wall Street thought the Fed would leave rates untouched. Market reaction was mixed, as stocks initially took off on the news, but retreated towards the end of the trading session. I think the real issue going forward is what's the Fed going to do next?
On this issue, nobody seems to share the same opinion. The hawkish camp continues to see inflation as a very real threat and several Fed officials have publicly commented that this problem is still very real threat to the economy.
The Fed's statement, accompanying yesterday's decision to leave the Federal Funds Rate at 5.25%, again mentioned the possibility that it might need to raise rates if inflation accelerates. Here's the money quote: "The Fed judges that some inflation risks remain." Now that may seem benign, and it likely is, but by leaving that line in their statement they served the market notice that they aren't ready to abandon any potential interest-rate hikes anytime soon.
On the flipside of the inflation coin, the central bank made mention of what it now calls a substantial slowing of the housing market. But despite this tip of the hat to housing, the Fed predicted the economy would continue to expand in the coming quarters.
The other Fed-watching camp is wondering if, or more precisely, when, the central bank will start cutting short-term interest rates. If the data comes in showing a slowing economy, the Fed probably will start to cut rates. How far in 2007 will that be? Nobody knows for sure, which is why the speculative juices are pulsing through the veins of the Fed-watching community.
One group thinks the Fed may begin a rate-reduction campaign as soon as early next year. I think this is a bit unlikely, especially given the number of new economic reports indicating the economy is holding up pretty well.
One key report came courtesy of the Labor Department. The report said that the economy produced a better-than-expected 132,000 new jobs last month. That number of new jobs included drops in construction and manufacturing employment. That news, combined with today's solid retail sales numbers, probably takes the Fed away from making a rate cut in its next meeting.
Still, when it comes to the Fed and the economic circumstances right now, we probably are just one big report away from either a quarter-point rate hike, or a quarter-point rate cut.
Keeping the markets off balance is likely the Fed's goal, and it is doing so with aplomb. I know I'd hate to be an economist taxed with predicting the Fed's next big decision. Fortunately, whichever way things go on the interest-rate front, we'll be ready to give you advice on how to profit.
NEW "SPECIAL REPORT" AVAILABLE NOW! 4
Worried about managing risk in this uncertain political and economic climate? If you aren't worried, you should be. The risks we all face right now require sound financial stewardship. These days, you just have to know how to protect yourself.
That's why I want you all to go here for your FREE Special Report titled, "The Successful Investor's Guide To Managing Risk."
This Special Report outlines the seven biggest threats to your financial nest egg and how you best can mitigate those risks by employing the strategies that have helped protect Fabian investors for nearly three decades.
If you invest, then you need to worry about risk. To guide you, use "The Successful Investor's Guide To Managing Risk".
DO YOU KNOW YOUR "INVESTOR CONFIDENCE" SCORE? 3
Do you know the factors that are important to measuring your confidence level in your current investment plan? Can you answer the following statements in the affirmative?
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I have a solid plan in place with Bear Market Protection (a clearly defined sell-discipline on my holdings) to protect my assets if the market suddenly turns.
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I know my broker is proactively monitoring my money every day.
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I know my investment plan will provide the sufficient asset growth I want and produce the income stream I need for my retirement.
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I know that my investment advisor is a good value. We have more than just a bull market strategy and we avoid any unnecessary risk for my plan. Fees are reasonable.
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I know my advisor is an expert, has the experience and is prepared for any situation.
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I am taking advantage of investment tools like ETFs that keep expenses low.
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Overall, I know I have the right plan in place to reach my investment goals.
If you can't answer the majority of these statements with a "yes," then you need to go to our website for more information and a FREE portfolio assessment.
Don't wait a minute longer. The only thing you have to gain is financial security.
ETF PROFILES NOW ON YOUTUBE 6
You probably all know by now what a huge fan I am of exchange-traded funds, but did you also know I do a regular ETF profile on my radio show, Making Money with Doug Fabian?
Each week, I profile several ETFs. Now, thanks to YouTube technology, you can catch a video stream of my live ETF and market updates -- and all you have to do is click here.
Plus, it's not just a one-way street anymore when it comes to discussing the markets. Sign up at the website to comment on my videos, send me a message, and get updates when we post new episodes. I broadcast an ETF and market update Monday through Saturday that is uploaded by 5 p.m. PST. And, if you want to check out past shows go to our video archive.
Don't forget, you also can listen to the show through our podcast and live streaming whenever it's convenient for you. It's all at the site and it's just another way we are helping you to stay on top of your money.
"GONZO" WISDOM
"No man is so foolish but he may sometimes give another good counsel, and no man so wise that he may not easily err if he takes no other counsel than his own. He that is taught only by himself has a fool for a master."
—Hunter S. Thompson, "gonzo" journalist
There's no shame in not being a financial genius. One of the biggest mistakes we all tend to make in life is thinking we know more than we actually do. If you need help with your money, don't be afraid to ask. Just remember what the great Hunter S. Thompson said about those who teach themselves, and remember that we are here to help.
Wisdom about money, investing and life can be found anywhere. If you have a good quote you'd like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my radio show, newsletters, seminars, or anything else.