Exchange Traded Funds Investing

Investing with Exchange traded Funds

Exchange-Traded Funds Are an Interesting Way to Invest.
Reading this article about ETFs on FT.com and systemic risks it is interesting and worthwhile to refer to some of the advantages and disadvantages of Exchange traded funds.
As the article mentions, ETFs have gained a lot of popularity during last years as a new form of passive investing. There are many categories of ETFs offering both flexibility and the freedom for a passive investor to choose what type of investment to focus on. From popular commodities such as oil and gold to major indices such as S&P 500 or Nasdaq ETFs allow to any investor to follow the moves without worrying too much about individual stock picking.
Major advantages of ETFs:
1. Invest in a wide range of assets at any time on a daily basis, buy or sell
2. Passive investing, capturing the return of the whole index
3. Diversification
4. Innovation investing in new asset classes and flexibility, new investing ideas
5. Offer liquidity
6. Tax advantages
7. Lower costs compared to Mutual funds
Major disadvantages of ETFs:
1. Systemic risks
2. Not control at the individual components of the ETF, passive investing
3. Not be able to outperform the general market, as their return should match the return of the asset class i.e. S@P 500
4. Problems for emerging markets due to illiquidity and fast turnover

There are also major differences between Europe and USA as ETFs are more popular in the USA, and are much more tax-efficient in the US market. Distribution and fragmentation have made ETFs less popular as investing choices in Europe.

So overall Exchange Traded Funds are a smart and effective way of investing. But there are a passive way of investing, so they are not suitable for stock-pickers. This does not mean that they are only long-term horizon related investing tools. The oil has made a nice rally during last week and an investor in an oil ETF going long would have a nice return in a very short period of time. ETFs are another great example of financial engineering, offering solutions, innovation, and flexibility to modern investing.

Stock market and Exchange Traded Funds

So invest in stock market and in ETFs.Why not?As this way of investing offers flexibility and more options to exploit stock market returns and opportunities,instead of focusing on individual stocks.

Stock market reaction to US election result

Stock market volatility

Now that we now the result and winner of US elections the stock market needs to find a direction.Asian stock markets tanked as the winner of US election was officially announced.Gold moved up,oil down,European stock markets opened lower but now rebound.
How will the US stock market react to the election result?A sell-off is very likely.But this could be a great opportunity to buy stocks at lower prices or sell stocks that deem to be overvalued.Overall volatility seems to be present,so a lot of caution is required when investing or trading the stock market not only today but the following days until the investors and traders and hedge funds, or big institutional investors make an opinion on the market not based on emotions such as fear or greed but on logic.Stock market always makes dips,and rallies.