Best of the Week
Most Popular
1. Best Cash ISA Savings Account for Soaring UK Inflation - February 2018 - Nadeem_Walayat
2.Gold Price Forecast 2018 - February Update - Nadeem_Walayat
3.Bitcoin Crypto Currencies Crash 2018, Are We Near the Bottom? - Nadeem_Walayat
4.Trump Bubble Bursts, Stock Market Panic Dow 1175 Point Crash Analysis - Nadeem_Walayat
5.Gold Corrects, Bitcoin Markets Crash, Whilst Stocks Plunge - Nadeem_Walayat
6.US Treasury Bonds: Fuse to Light the Bonfire - Jim_Willie_CB
7.Dow Falls 666 Points As Cryptocurrencies Crash And Krugman Emerges From His Van - Jeff_Berwick
8.Stock Market Roller Coaster Crash Ride Down to Dow Forecast 23,000 - Nadeem_Walayat
9.Trading the Shadows - Oil, Dollar, Stocks, Gold Trend Analysis - B.R. Hollister
10.Stock Market Analysis: Baying for Blood - Abalgorithm
Last 7 days
World Stock Market Indices: What Will Happen in 2020 – 2022 - 25th Feb 18
Will We See A Cryptocurrency Wipeout This 2018? - 25th Feb 18
Stock Market Volatility Attributed to 'Shenanigans' - 24th Feb 18
Reintroducing The Concept Of Stock Market Investing Risk - 24th Feb 18
How Global Growth and Infrastructure are Driving Commodities - 24th Feb 18
Tips to Get Financing for a New Business - 24th Feb 18
Heavy Police Presence at Resumption of Sheffield Street Tree Fellings Protests - 24th Feb 18
Why You Should NOT Sub4Sub Free Youtube Subscribers - YTpals, Subpals, SubmeNow Test Results - 23rd Feb 18
One Belt, One Road, One Direction for Precious Metals - 23rd Feb 18
Gold’s Curious Sentiment - 23rd Feb 18
Relationship Between Crude Oil and U.S. Dollar in February 2018 - 23rd Feb 18
Why The Next Oil Boom Will Be Fueled By Blockchain - 23rd Feb 18
Gold Bull and Bear Markets - 23rd Feb 18
Why Recent Lows Are Crucial for US Dollar - 23rd Feb 18
Will Bitcoin be Larger Than NEO in 2018? - 23rd Feb 18
Stock Market SPX Probable Pop-n-drop - 22nd Feb 18
Stocks Fail to Hold Gains, But Still No Correction - 22nd Feb 18
Why We Should Buy Essay - 22nd Feb 18
The Latest US Debt Blow - 22nd Feb 18
6 Tips For Seamless Business Foreign Exchange - 22nd Feb 18
How to Anticipate Stock Market Trend Changes - 21st Feb 18
Gold Miners’ Rally? What Rally? Watch Out for More Fake Moves! - 21st Feb 18
5 Big Drivers of Higher Inflation Rates Ahead - 21st Feb 18
Goofy Indictments Divert Attention from Criminal Abuses at the FBI and DOJ - 21st Feb 18
Bitcoin or British Pound ‘Pretty Much Failed’ As Currency? - 21st Feb 18
Stock Market Waiting for the Fed - 21st Feb 18
National Identity Demands Restrictive Immigration - 21st Feb 18
Best Opportunities for Freelance Technical Writing Jobs - 21st Feb 18
4% US 10-year Treasury Note Yield Will Be a Floor Not a Ceiling - 20th Feb 18
Governments Are LYING about Their Gold Activities while Mining Companies Cower - 20th Feb 18
No Silver Lining Here - 20th Feb 18
Semi Conductor Stocks SEMI Bearish? - 20th Feb 18
The Prisoner Promised Land - 20th Feb 18
Best Car Dash Cam Review: Z-Edge S3 Dual Dash Cam - UNBOXING (1) - 20th Feb 18
How Inflation Reduces The Real Value Of Social Security Net Of Medicare Premiums - 19th Feb 18
Could Stellar Lumens be a Challenger to Bitcoin for International Payments? - 19th Feb 18
US-China Trade War Escalates As Further Measures Are Taken - 19th Feb 18
How To Trade Gold Stocks with Momentum - 19th Feb 18
Is a New Gold Bull Market on the Horizon? - 19th Feb 18
Stock Market Decision Point! - 19th Feb 18
An Inflation Indicator to Watch, Part 1 - 18th Feb 18
Get on Top Of Debt Before It Gets on Top of You - 18th Feb 18
Will the Stock Market Make a Double Bottom? - 18th Feb 18
5 Reasons Why Commodities Are the Investment Place to be in 2018 - 18th Feb 18
1 Week Later, Stock, Bond Market Risk Remains ‘On’ as 2 of 3 Amigos Ride On - 17th Feb 18
Crude Oil Prices: A Case of Dueling Narratives? - 17th Feb 18
Free 1000 Youtube Subscribers Services - YTpals, Subpals, SubmeNow Test - 17th Feb 18

Market Oracle FREE Newsletter

Urgent Stock Market Message

Former Lehman Brothers Trader: ETFs Are A Convenient Yet Very Dangerous Tool For Investors

Stock-Markets / Exchange Traded Funds Sep 13, 2017 - 05:36 PM GMT

By: John_Mauldin

Stock-Markets

BY JARED DILLIAN : Here’s the least original statement of 2017: There are a lot of different ETFs. There are:

  • Equity ETFs
  • International ETFs
  • Fixed income ETFs
  • Currency ETFs
  • Commodity ETFs
  • Volatility ETFs

There are more… plus leveraged and inverse versions of most of these leveraged and inverse versions of most of these.

ETFs have made it possible for everyday investors to invest like George Soros. Except most everyday investors inevitably do a much worse job than George Soros!

Still, it is lots of fun. It is just probably not in the best interests of your retirement savings.

Just Because You Can, Doesn’t Mean You Should

ETFs give people the ability to do lots of different things. ETF innovators have managed to securitize just about anything (read more about it in my free special report Investing in the Age of the Everything Bubble).

I think we reached the last frontier in August when a LIBOR ETF was announced (it is leveraged, naturally). So you can trade LIBOR, you can trade a basket of junior silver miners, you can trade double inverse volatility, you can trade the shape of the yield curve, and you can trade Indonesia.

But I’ll bet you that the people who are investing in Indonesia have not done a lot of work on Indonesia.

And I’ll bet you there are people speculating on the yield curve who have not done a lot of work on the yield curve.

Moral of the story: Just because you can do these things, doesn’t mean you should.

One thing a lot of investors don’t realize is that professional investors put an awful amount of time and effort into research.

I do a fair amount of research in the course of writing newsletters. And sometimes, I will meet with a portfolio manager who is working on the same trade.

That portfolio manager will have had a team of analysts working on it for months. So when he ends up buying that Indonesia ETF, he has done all the work, and he is pretty freakin’ sure.

Many investors haven’t done the work. They don’t have the time (they work day jobs), and they don’t have the scale (they don’t have a team of analysts working with them, with access to all the market data in the world).

Nobody likes to think of themselves as the patsy at the poker table. But you can’t compete with the pros.

Despite What I’ve Said, ETFs Are Your Friend

I am no financial Luddite. I think the ETF is one of the top five financial innovations of the last 100 years! Giving people access to stuff they never had access to before is a great development.

Thirty years ago, you couldn’t buy Indonesia at all. Probably the only way to buy Indonesia was to be Mr. Big Time Portfolio Manager and access foreign markets through a big broker like Goldman Sachs.

So I would never be so paternalistic as to suggest that people should be prevented from trading this stuff for their own good. No. What I am saying is:

  1. Macro trading is a lot of work.
  1. You probably don’t have time to do the work.
  1. So you should be realistic about your expectations.

If you accept that and still really want to be a dedicated ETF investor, then here’s what you need to do.

Determine your asset allocation, and pick some broad-based, low-cost ETFs, keeping concentration and correlation in mind. Try to avoid making radical changes to the portfolio unless absolutely necessary. And think long term: 5–10 years, not 1–2 years.

Sounds simple? If it does, it kind of shouldn’t.

Grab Jared Dillian’s Exclusive Special Report, Investing in the Age of the Everything Bubble

As a Wall Street veteran and former Lehman Brothers head of ETF trading, Jared Dillian has traded through two bear markets.

Now, he’s staking his reputation on a call that a downturn is coming. And soon.

In this special report, you will learn how to properly position your portfolio for the coming bloodbath. Claim your FREE copy now

John Mauldin Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules