Death by ETF - Warning About Exchange Traded Funds!



Exchange traded funds (ETFs) are just like stocks, but there is a major problem with them. Do not buy or sell any ETF until you watch this warning. Subscribe to our channel, to learn more about investing, penny stocks, and profits from high-quality, low-priced shares: https://www.youtube.com/user/PeterLeedsPennyStock ETFs are a lot like a mutual fund, in that they hold a group of investments (stocks + bonds). The beauty is that they trade just like stocks, and have lower commissions, and you can trade any time. Each ETF is designed to mimic a specific investment or group of investments. So, for example, GLD attempts to copy the movements of gold prices. If you think gold will go higher, you can buy GLD. If you believe the economy of Africa will grow, you could buy AFK, if you want more exposure to Germany, you could purchase EWG, and so on. Warning number 1, and this isn't what I need to tell you about in this video, sometimes trading can be thin, so use limit orders rather than market orders if you are going to trade them, especially true in the very early or very last trading minutes each day. Anyway, here is the problem with ETFs which can cost you a huge amount of money. ETFs are actively managed, being continually rebalanced so that their holdings reflect the intention of the ETF. For example, INDA is meant to mirror the action of a wide range of companies in India. It involves 85% of the Indian stock market, and needs to be adjusted on a daily basis to make sure it is staying true to its purpose. With these adjustments comes a small management fee. Typically this expense will be very small, usually a fraction of a percent, and is typically less than a common mutual fund. - straight-up ETFs are pretty good, but leveraged ETFs will destroy your investment. - if tracking oil prices, USO will move very similarly to oil. If oil goes up 10%, the ETF may only rise 9.8%. This slight loss is barely noticeable, and it is called slippage. Not a huge deal, but this happens every day. When you get into leveraged ETFs, this becomes a major problem. For example, UWTI is designed to provide 3 times the return of WTI oil. If WTI goes up 1%, UWTI tries to rise 3%. Likewise, if WTI falls 1%, UWTI would fall about 3 times that much. The problem is slippage. In reality if WTI rises 2%, UWTI is designed to climb three times that much, so 6%. However, in reality it may only gain 5.95%, for example. Then, if WTI falls 2%, it is back to where it originally started, but UWTI is designed to fall 3 times that amount, or 6%. In reality, it will likely fall a tiny bit more than 6. These slight shortfalls get applied every day, so if you lose a fraction of your investment, again and again and again, you are suffering a slow bleed. You probably wouldn't even notice it on any single day, but that is why the long term charts of any leverage ETF are always in a slow, steady downtrend. ETFs, especially the leveraged ones, are great for making a very short term call, but should never be used for long term investing. For example, if you expect oil prices to spike, you could play it by buying UWTI, but do it only as a short term trade. If you hold for weeks or months, you will almost certainly lose . Protect yourself when trading ETFs. Consider avoiding buying or selling in the first few or final few minutes. And do not hold ETFs for extended lengths of time, especially the leveraged ones. . Get More From Peter Leeds: YouTube: https://www.youtube.com/user/PeterLeedsPennyStock HOME = https://www.peterleeds.com/ .... Facebook = http://bit.ly/1t4Tifo Twitter = https://twitter.com/peter_leeds Penny Stocks for Dummies = http://amzn.to/1WyGaLo ... E-Mail: Questions@PeterLeeds.com Phone: 1.866.695.3337 .

Comments

  1. I did not know what an ETF was until this week.  Horizon put one out HMMJ.  Marijuana stocks on the TSX.  What a joke. No research, no nothing.  Just a bunch of stocks where half of them are going no where.  Only about 4 stocks in it that you can count on.  The rest are junk and will fail.
  2. rule #2 ....be aware of the Feds, President and major announcements (like employment/dollar/other commodities)  when trading ETF's....it can trigger a spike on the exactly moment...don't hold a position at that time...its GAMBLING !!!
  3. wondering how you feel about index funds...I don't think they have this same slippage problem or downtrend in the long term
  4. I cannot see why anything mentioned here is a problem, its just feature of that investment instrument. You need to know what you are putting your money into, like with everything else.
    You can surely use passive managed highly liquid ETFs. For example simple you could buy ETF mirroring MSCI World Index when Dollar is up and SPY when dollar trends down in monthly balancing dual moment strategy. Does not make huge wins but makes money every year except situations like 2008.
    You can also use leveraged ETF for swing trades, and actually make money from build in ETF weakness. I have made really nice returns shorting VIX with VXX for the past 6 months but agreed, I would not want to be holding that combo in highly volatile market.
  5. Well the bad news is that I've lost my butt on SQQQ over the last year, any suggestions now....haha :(
  6. I am still very new to trading and the more I learn the more I find out how I know nothing yet. I just had an observation on how come JNUG and JDST etfs are moving perfectly in the opposite direction. I ask why on stocktwit and I got laugh at. So what is the relation between those two. It's something about leverage and exposure but I don't get how 2 well known etfs would be perfectly opposite "inverse" they say. Is it so you go long on one and short the other?
    Thanks
  7. You preface your video with sort of a semi-restriction of your comments to long term trading. How about for swing trading? If you trade only with a trend, and switch to the inverse ETF at the reversal point, is there any reason not to do that? For example, go long JDST from early November, 2016 until 12/20/16 (140%) and then switch to JNUG from 12/20/16 to 2/8/17 (about 200%). Are those returns not real? I know there is re-valuation, etc going on, but don't the prices reflect the true results over the time periods mentioned?
  8. What about passively managed ETFs?
  9. What about the JSE:DBXWD it's going upwards most of the time.
  10. I've been watching my seven ETF portfolio for over a year now, really haven't gained or really losses much money, gonna watch it maybe a year or two more and than decide if EFFs are a worthless investment product manufactured by Wall Street to shaft the working man
  11. what is a good percent return for etfs?
  12. the 5 lessons for beginners video was unavialable :/ and how do you identify if a stock is an ETF and what kind of ETF?
  13. You would still lose the small percentage by trading stocks individually because of trading costs and margins.
  14. hey Peter, I've recently been looking at a lot of ETF's and I just came across this video and you advised against many of the things that I am doing. I'm currently interested in silver, gold and bear market etfs because i very much believe they will outperform. I also look at stocks as well but I always view them as a bit riskier since theres always the chance that they could go bankrupt or bad news can be released. I thought etf's would be safer considering its many silver miners instead of just one. I was planning on buying a 3x leverage physical silver etf to hold for as long as I think that silver will go up. do you advise against this? If me and you both are bullish in the metals then wouldnt a 3x leverage be even better? I just need clarification. Thanks in advance.
  15. Great Clip Peter.. What you just explained is exactly my dilemma .. I bought UWTI on 3/2016(now known as UWTIF) and the deterioration of that stock is evident by what you just described regarding slippage and value loss along with the oil sector decline last few years.. now what do I do? do I get out asap and accept the loss or do I cost average my position back in for a sell out on a break even or a lower loss average?.. my current B/E per share is $207! if I buy another 100 shares my B/E per share will be $40 and with the oil on the move can it be a good strategy? Not asking for advise on when to sell etc. but if this was you what would you do if this was your scenario?.. any input will be greatly appreciated.. thanks
  16. Are there any #Bitcoin #ETFs out there yet?
  17. Hi Peter. I live in Australia and there is a limited number of ETF's available to me that trade on the ASX. If I want to, can I for example purchase a US Financials ETF that only trades on the NYSE or LSE from Australia?
  18. Better than paying high fees to a fund manager.
  19. hey, I'm a new investor so I bought some uwti, unfortunately I just read that the symbol will be delisted. Will I loose all of my money? please help.
  20. if etf's are no good, where should I put my money for long term investment????? mutual funds??? please help, I'm 23, but want to save for retirement now with my Roth IRA


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