The new millennium has brought forth to the markets a plethora of Exchange Traded Funds (ETF’s). The Prudent Trader database now contains well over 400 ETF’s, almost double our original database of two years ago. A great alternative to individual stock selection, similar to mutual funds, ETF’s allow investors/traders to participate in baskets of stocks (by category), participate in commodities, foreign currencies, international and emerging markets, even leveraged and short market ETF’s. According to the “Wall Street Journal” the number of ETFs will double in 2007 alone.
How does one wade through all the choices even amongst competing ETF’s with the same objective? This new Prudent Trader section will help you cut through the shear volume of ETF’s and narrow your search criteria based on many pieces of information.
Unlike our Sector Analysis section which utilizes composite data by Sector and Industry Group, ETF’s do not lend themselves, at least at this point in time, to this type of analysis. That may come in the future, however, so stay tuned. When determining which ETF’s to trade or invest in, especially when comparing competing ETF’s, look not only at the component issues but also the weighting of those component issues. For Example: Merrill Lynch’s Utility Holders (UTH) contains 19 utility stocks but they are not weighted equally. The top two holdings, as of this writing, are EXELON CORPORATION (EXC) comprising 14.4% and TXU CORP. comprising 11.74%. Together they their weight -> one quarter of UTH. That weighting is not good nor is it bad, you need to be aware that your investment in UTH is greatly dependent upon the price action of only two issues. Contrast this with let’s say Vanguard Utilities ETF – (VPU) which contains 89 stocks with the top 10 comprising approximately 44% of the weighting. Which one is better for you? Enter the Prudent Trader Exchange Traded Funds section!
First things first: If you’re an experienced trader and very knowledgeable in Exchange Traded Funds move on to the next section. If however you are new to trading or new to Exchange Traded Funds here are some excellent articles to review and learn from
- Why Exchange Traded Funds?
- How ETFs work?
- Tax Advantages with ETFs
- Asset Allocation with ETFs
- Understanding Style ETFs
- Using ETF Options Conservatively
- Options: Protecting Profits with ETFs
- Exchange Traded Fund Glossary
- History of Exchange Traded Funds
- ETFs vs. Closed-End Funds
- ETFs vs. Mutual Funds
- Advanced ETF Strategies
At some point during your analysis you will need to view the component issues of the ETF’s of interest prior to investing/trading. Probably the easiest way to accomplish this is through the fund families web site. Links to major fund families and ETF component issues:
- Builders Funds
- Barclay’s Ishares
- First Trust
- Merrill Lynch Holders
- Power Shares
- Pro Funds
- Rydex Funds
- S&P SPDRS
- StreetTracks-State Street Advisors
- Wisdon Tree
After the close of trading, numerous updates are generated to reflect adjustments by the exchanges and data vendors to price and volume statistics for the day. Such adjustments often occur days and even weeks later. Such adjustments are reflected in PrudentTrader’s full nightly rebuild of all databases.
Accuracy / Best Efforts:
PrudentTrader.com uses its best efforts to maintain databases to the highest standards of accuracy and timeliness. Occasionally, uncontrollable events temporarily preclude these efforts including but not limited to: inaccurate information from data vendors, late information provided by the sponsor of a particular ETF, computer malfunction, Internet disruptions, human error, or some other unforeseen event. In any case, all errors, for any reason will be corrected as soon as possible. Subscribers will be notified on the web site when an issue arises.
The Reports, Charts, and commentary are provided by Prudent Trader.com as a service to its members and may be used for informational purposes only. PrudentTrader.com is an independent electronic publication. The publisher of The PrudentTrader.com is not a registered investment adviser or a broker dealer and is not acting in any way to influence the purchase of any security. Our analysis of stocks, articles, and other features should not be construed as investment advice. It is meant to be a starting point for further research. An investor’s best course of action must be based on individual circumstances. You are responsible for conducting your own research on stocks that appear interesting to you. You must assess the risk of any trade with your broker, or investment advisor, and make your own independent decisions regarding any securities mentioned herein. The author, and any associates and affiliates may have positions in some of the listed stocks. PrudentTrader.com is published in accordance with The Investment Advisers Act of 1940, Section 202(a)(11)(A)-(E), which excludes certain persons or firms from the definition of an investment advisor.