ETF Investment Guide - Exhange Traded Fund Blog

Since I started posting trade ideas for ETFs two weeks ago, I decided to create an online portfolio with Google Finance to keep track of my performance. I started a small portfolio with 50k US$. So far doing pretty well. I will post results of trades as comments to my trade idea blog posts and post week or monthly portfolio updates as well to show you how well investing in ETFs can work. The expenses are calculated at 4US$ per trade fee and 15% withholding tax on dividend payments.

The last weeks have seen a tumble in stocks worldwide. Fear level is high, but a couple of factors could play well for a relief rally as earnings season is just a few days away. My two main trade ideas are:

FAS - Direxion Daily Finan. Bull 3X Shs(ETF)
Bank stocks have been beaten up due to currency concerns and the US' inability to pass new banking legislation. Alongside analysts have warned about slowing earnings growth for US banks. However, most banks have consistently beat earnings estimates during the past quarters. I believe there are good chances they will post positive results again. In addition recent developments point to an lawmaking progress include cutbacks on proposed taxes for financial institutions. With depressed levels for banking shares and a possibly bounce from old support levels, the upside could be substantial. At least a relief rally to important moving averages is possible. However, should earnings turn sour and lawmakers become more divided this trade would collapse.
My idea is to buy at around 20 US$ and sell half of this position around 22.50 US$ level and wait for the other half to go higher leaving TP open, but aiming at 24 to 25$ level within this month. SL would be somewhere around 18.60$ as 20$ support needs to hold if my ETF trade idea is correct. Actually, I am so convinced this will play out favorably, I have added August Call options for Citibank at strike price 4$. I believe Citi does have significant upside potential. However, this trade is very risky. Chart courtesy of SogoTrade

EWA - iShares MSCI Australia Index Fund
Australia is seen a proxy for Asian growth, due to their large resources being in high demand beyond just in China. While there is danger of further downside, I consider current levels of around 19 US$ as a solid buying opportunity. This Australia ETF pays 2.1% dividend and will be one of the cores of my long term equity portfolio.

I want to have this ETF in my portfolio and believe valuations are reasonable at the moment. Should it trace lower I will add to the position. No stop loss and no TP. It's a long term ETF investment I will keep and make money from. I would go as far as holding 3 to 5% of my longtime portfolio in EWA. Chart courtesy of SogoTrade

Leveraged ETF investing has been a great tool to enhance my trading experience over the past couple of months. It allows to double or triple gains in a volatile market, but it can also boost your losses. Many brokers have reacted to elevated risk exposure and are now imposing new margin requirements on leveraged ETF trades. Basically, you can just use them with your cash, but no longer on a margin. It's a pitty as these new restrictions will rather create more damage than good as hobby traders will need to go back to Forex or futures trading to be able to use reasonable leverage in the near future.

One of the first things I learned about any sort of investments: The need for good and reliable information! One of my most valuable sources of trustworthy information and investment research is an online subscription to Morningsstar, a website who screens investment products including ETFs and publishes analyst reports with previews for possible developments. While the basic version of the Morningstar website is available for everybody for free, premium services such as analyst reports and fair value estimates are available to premium members, only. To me as an ETF investor premium services offer a lot value. They allow me to read reports, create an online portfolio with summary reports and intraday alarms that notify me of important changes to a fund/stock and that enable me to screen funds for opportunities and x-ray them in regard of exposure to certain stocks.

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Finally, I found a new direction for my fund blog. I decided to devote my new investment blog to Exchange Traded Funds or short: ETF investing. ETFs are similar investment vehicles like mutual funds, but they are cheaper as they do not carry an upfront load on purchase. They are traded in real time on exchanges just like stocks. This way they can be utilized for both, long term investments and short term profits of intraday price fluctuations. ETFs come in large varieties. Some are structured to represent exchange indexes such as the Dow Jones Industrial Index or Nasdaq, others mirror sectors or regional markets. A good portion of exchange traded funds are leveraged by factors 2 or 3 to boost profits (or extend losses in adverse market situations - leverage = higher risk - don't forget that!) ETFs are self administered over a brokerage account with a reputable institution or a discount broker like Sogo Trade. With a discount broker ETFs transactions can be as cheap as 3 USD per purchase/sale. That's much cheaper than purchasing a mutual fund over a bank with a load of 4 to 5% of face value.
My future blog posts will be devoted to various ETFs that I am screening and investing in. Some are long term investments (example: EEM - an emerging market ETF), while others are good for intraday trades (example: FAS - a leveraged 300% ETF for financials)

Don't get fooled by all those HYIP sites on the internet. Why? Most of them are scams! Yes, it is possible to earn 20 or 50% high yield on your investment in just one day, but you need to take a very big risk and have a lot of luck. It's like winning in the lottery. It happens once in a lifetime and the rest of the time you lose.
How can you spot HYIP scams? Hey, be smart and use common sense.

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