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Questions tagged [etf]

To be used for any questions relating to Exchange Traded Funds.

31
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2answers
1k views

What are the important differences between mutual funds and Exchange Traded Funds (ETFs)?

I've been considering, but haven't committed myself yet to investing in Exchange Traded Funds (ETFs), but have to admit that I don't yet fully understand the use-case for them. What factors are ...
20
votes
4answers
4k views

Why are daily rebalanced inverse/leveraged ETFs bad for long term investing?

I was reading this article about S&P 500 short ETFs: https://www.zacks.com/stock/news/176217/4-ways-to-short-the-sampp-500-with-etfs and I was confused when it said: "investors should note that ...
20
votes
7answers
3k views

Investing in a leveraged index ETF for retirement. Risky?

I'm 23, and in addition to my 401k at work, I have a few thousand saved in an IRA. Right now I have it sitting in Treasurys earning around 3%. Over the past 50 years the S&P has averaged around ...
16
votes
8answers
1k views

No transaction fee ETF trades - what's the catch?

I just noticed TD Ameritrade has program where you can trade from a list of ETFs with zero fees. Sounds like it could save me a bit of money, but my cynical side wonders how they make money off such ...
9
votes
3answers
980 views

Long Term Cash-Equivalent ETFs for “cash” allocation

My retirement account goal analyzer advises that I keep 3% in cash. My retirement date is over 30 years from now, so I can tolerate heavy volatility and certainly don't need liquidity. Does it make ...
5
votes
1answer
526 views

Wash sale rule + Mutual Funds/ETFs?

According to IRS rules, you can't sell a security, take a capital loss on your taxes, and then buy back the same or a "substantially identical" security within 30 days. However, "substantially ...
7
votes
1answer
1k views

“Cap gains exposure” of an ETF — what does it mean?

Morningstar provides an ETF data point called potential cap gains exposure. For example, here is Vanguard's Europe ETF (VGK): This value is negative 78% for VGK. I understand that this is a good ...
7
votes
2answers
2k views

Pros & cons of buying gold directly vs. investing in a gold ETF like GLD, IAU, SGOL?

Google search brings up some articles on this topic, but they can be biased, so: What are the advantages and disadvantages of buying physical gold vs. investing in a gold ETF like GLD, IAU, or SGOL?
17
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3answers
1k views

Regular contribution threshold for ETF vs Index Mutual Fund?

I've seen enough info out there comparing lump-sum investments into ETFs vs mutual funds with respect to broker commissions in the case of ETFs, and the discrepancy between MERs between the two. In ...
21
votes
4answers
5k views

Why would a long-term investor ever chose a Mutual Fund over an ETF?

(I read this previous question but would like to differentiate my question by having it focus exclusively on long term, buy and hold investing). From my understanding, it is conventional wisdom that ...
8
votes
1answer
146 views

Do ETF owners buy and liquidate units from the market when gap between market value and value of underlying shares is large?

Due to various reasons, an ETF, even an index ETF might trade at a value lower that the value of its underlying securities. In such a situation, can the company managing the ETF actually buy from the ...
1
vote
1answer
456 views

Why an ETF mirrors the underlying index on a day to day basis but not on a long term basis

Some ETFS like NUGT,DUST say that they replicate the performance of the underlying index on a daily basis. My first question is, do all ETFS do this, or only some? Also, why does it say that "not ...
23
votes
3answers
1k views

What differentiates index funds and ETFs?

Many companies offer index funds and ETFs. If two funds or ETFs track the same fund, what differentiates the two? Is it common for one index fund to outperform another? How can this happen if the ...
62
votes
6answers
7k views

At what point do index funds become unreliable?

Passively investing in exchange-traded funds that track some broad index is often recommended for private investors that don't have the time or expertise for active investment. In particular, index ...
10
votes
4answers
878 views

What low-fee & liquid exchange-traded index funds / ETFs should I consider holding in a retirement portfolio?

I'm still (one year later) going through an exercise to restructure my retirement portfolio. To date, I've been using a mix of exchange-traded index funds. Some trade on the TSX, and others trade in ...
1
vote
2answers
1k views

How to understand a volatility based ETF like VXX

The ETF VXX is based on the volatility index VIX. If volatility goes up, VIX goes up and VXX goes up. Similar thing for the downside. Now when I buy an ETF like SPY, I can conceptually understand that ...
5
votes
1answer
439 views

Why do passive ETFs require so much trading (and incur costs)?

As far as I've understood, the idea of passive ETFs is to track an index. Typically, the index is a value-weighted stock market index, such as the S&P500. Now, if I'm not mistaken, tracking a ...
4
votes
1answer
566 views

What is the difference between shares and ETF?

For example, I see that this: Vanguard FTSE All-World ex-US Index Fund Investor Shares (VFWIX) is Also available as an ETF and at a lower cost as an Admiral™ Shares mutual fund What is the ...
3
votes
4answers
2k views

“Diversifying” by going Long and Short Simultaneously

I was hoping someone could take a critical eye to an idea i've had. Traditionally it's said that one should diversify across various asset classes and ultimately types to spread the risk out based on ...
9
votes
3answers
728 views

ETF vs Mutual Fund: How to decide which to use for investing in a popular index?

How do you decide between investing in an ETF, vs. in a mutual fund, for the popular stock indexes? Trading costs, tax efficiency, capital gains?
4
votes
2answers
3k views

Who determines, and how, the composition of the S&P 500 index?

I thought S&P 500 would contain the top 500 U.S. companies by market cap, but apparently that is not the case? e.g., Facebook (FB) was only recently added and has market cap of $100B whereas ...
2
votes
1answer
142 views

Does GOP tax reform bill require selling earliest shares first?

An early draft of the GOP tax reform bill contained this provision, as reported by taxfoundation.org: The Senate draft of the Tax Cuts and Jobs Act would require sellers of stock in any one company ...
2
votes
2answers
581 views

Why buying an inverse ETF does not give same results as shorting the ETF

I was reading on the pros and cons of shorting an ETF vs buying an inverse ETF on yahoo I do not understnad this explanation why over hte logner term, shorting is not equivalent to buying an inverse ...
2
votes
1answer
441 views

How does a stock price chart compare to a performance chart?

I'm new to stocks, and trying to determine the historic behaviour of a particular ETF. However, I find that the stock price chart viewable on my investing site and the stock performance listed in the ...
1
vote
4answers
873 views

Is the gold and silver in the GLD and SLV ETFs leveraged?

There are various blogs and videos that indicate that the gold that GLD holds (via HSBC) and the silver that SLV holds (via JP Morgan) is leveraged 50 to 1 or 100 to 1. For me there are some ...
25
votes
7answers
2k views

Why is the dominant investing advice for individuals to use mutual funds, exchanged traded funds (ETFs), etc

The dominant advice on this site (including that which I give to novices) regarding investing is to only invest in fund vehicles (mutual funds, ETFs, etc), rather than in individual stocks. Why is ...
13
votes
7answers
2k views

How can so many ETFs tracking the same index coexist?

I understand that different ETFs may cost different amounts of money per share, as you are buying a proportional amount of each company on the index, but why can two ETFs that cost roughly the same ...
11
votes
6answers
5k views

Should I continue to invest in an S&P 500 index fund?

I am saving to buy a house in 5-8 years. This year I invested $40,000 in a prominent ETF which tracks with the S&P 500. So far, I've lost $3,250, that is the stocks are now worth $36,750. I save $...
8
votes
2answers
906 views

Is my “retire young” strategy a sensible one?

My goal is to have enough to retire at 40. I have 11 years to go (I'm 29) as of the past 15th. To be clear, I don't plan on retiring, maybe ever, but I want to have enough to just quit one day if I ...
7
votes
1answer
3k views

Where can you find historical PEs of US indices?

Indices tracking ETFs * DIAMONDS Trust I (ticker: DIA) tracks DJIA * SPDRs (ticker: SPY) tracks S&P 500 * NASDAQ 100 Trust (ticker: QQQQ) tracks NASDAQ 100 * iShares Russell 2000 (ticker: IWM) ...
6
votes
4answers
5k views

What is the easiest way to back-test index funds and ETFs?

Some authors are irritating such as Stein, more here, they keep throwing people all kind of new "investing" strategies and different ideas after their last ideas stopped working. I feel such authors ...
18
votes
5answers
14k views

Why don't SPY, SPX, and the e-mini s&p 500 track perfectly with each other?

These tickers (SPY, SPX, /ES) are all based off the S&P 500 yet the relative lows and highs diverge. Can someone provide a basic explanation what causes this to happen? I feel like it may stem ...
11
votes
4answers
3k views

Is it a viable/good long term investment strategy to buy only index ETFs?

I'm in my late 30s living in the EU and for some time now, I've put the vast majority of my savings into a number of index ETFs. This is based on the philosophy that trying to beat the market is a ...
9
votes
3answers
796 views

Where are Bogleheadian World ETFs or Index funds?

The term bogleheadian is a bit ambiguous term but its simplification means low-cost, diversified, tax-efficient -- solutions. The slant is ETFs or index funds. William Bernstein wrote in some of his ...
6
votes
1answer
205 views

Can an ETF perform differently than its holdings?

A mutual fund is just a portfolio of stocks (or other assets) and hence the fund performs as well as its holdings [minus various fees]. However, an exchange traded fund (ETF) performs, like a stock, ...
3
votes
3answers
277 views

Is investing in an ETF generally your best option after establishing a Roth IRA?

It seems that many people recommend investing in an ETF when you just start out with a Roth IRA at a very early age. I was wondering why this is so, and if there are some better or complimentary ...
5
votes
3answers
394 views

What to Look for in ETF

I wish to invest ETF. Sure, I can see what companies it comprise of. Sure, I can open brokerage account in my bank, etc. How do I know the ETF I purchase is legitimate? What if the ETF is fooling ...
10
votes
3answers
411 views

What kinds of exchange-traded funds (ETFs) should specifically be avoided?

This is related to my other question. There, I was asking what exchange traded funds I should consider for inclusion in my retirement portfolio. That got me thinking: What kinds of exchange-traded ...
9
votes
3answers
782 views

Should ETF currency risk be avoided by changing denomination or selling in a different currency?

I am about to purchase international stock and bond ETFs as part of my retirement portfolio. I am concerned about currency denomination. Suppose that I purchase an ETF in Euros and when I start ...
6
votes
1answer
370 views

Mutual fund invests in mostly the same stuff as ETF, but has much higher expense ratio? (biotech sector)

Looking at two funds, FBIOX and IBB, it seems that they mostly invest in the same things (at least the top 10 holdings are roughly similar), but the expense ratio for FBIOX is .81% vs. .48% for IBB. ...
5
votes
3answers
258 views

Is there any evidence that “growth”-style indexes and growth ETFs outperform their respective base indexes?

For example Vanguard has the Vanguard S&P 500 ETF and the Vanguard S&P 500 Growth ETF. Just looking at the returns, it looks like the growth ETF has outperformed the S&P 500 ETF: ... but ...
4
votes
3answers
319 views

Are wash sale rules different for stocks and ETFs / Mutual Funds?

In this answer to this question, JoeTaxpayer writes: To take the loss this year, he'd have to sell soon, and can't buy it back for 30 days. If, for whatever reason, the stock comes back a bit, he's ...
1
vote
2answers
66 views

Bid/Ask when trading ETFs?

Let's say it's an index tracking ETF. Isn't the ETF price determined by the index value? Why does it have bid/ask spread then? Could someone explain the bid/ask concept when trading ETFs.
11
votes
2answers
2k views

Why is an ETF, which is tracking foreign equities, ticking in my local time zone?

I have recently bought the N100 ETF, which tracks the Nasdaq 100. This is an Indian ETF. So, if it is tracking the Nasdaq 100, then why and how is it ticking in my (Indian) timezone?
7
votes
1answer
303 views

What is the least-bad way to invest a Simple IRA with heavy fees around every corner?

Given the following situation: an employer-offered "Simple IRA" run by a major brokerage with 1% gross pay matching; No near-future feasible opportunity to invest the Simple IRA contribution in a no-...
7
votes
3answers
2k views

Where to find out conversion ratio between General Motors bonds and new GM stock?

I bought some General Motors bonds (ETF-traded under "XGM" symbol) when they were at depressed prices, before GM declared bankruptcy. GM is supposed to be having an IPO sometime in November, and ...
6
votes
2answers
200 views

Investments backed by physical Diamonds?

I understand people can invest in Gold via ETF's which are investments backed by physical gold. My question is, do investments exist which are physically backed by Diamonds?
6
votes
4answers
734 views

How should I begin investing real money as a student?

(Skip to the 3rd paragraph for the basics.) Alright, so for starters, I'm in high school. I'm 17 and have two jobs: one is for fun, basically, and the other is a job that I can live off of. I go to ...
5
votes
2answers
1k views

What happens to your investment if the broker (which acts as a custodian) goes bankrupt?

For instance, you purchased ETFs using a broker that also acts as a custodian, what will happen to your investment in case the broker / custodian goes bankrupt? Will you lose all your investments? (...
5
votes
3answers
635 views

What ETF best tracks the price of gasoline, or else crude oil?

Is there an ETF that very closely tracks the price of gasoline? In lieu of that, which ETF best tracks the price of crude oil?