Would you recommend buying Mutual Funds or ETFs right now?
Best Answer
731 points
thinker70 answered 8 months ago …
Some good answers already. The reason i would not buy Mutual funds right now is because managers may be FORCED to sell even good stocks to meet redemptions. Also due to the VOLUME most mutual funds must invest in any single stock they are at best a long term play and not gered to the short term! The markets are simply too volatile as to direction, which as we have seen recently can swing wildly on a daily basis making it difficult for the average mutual fund to benefit in the short term.
ETF,s offer far more flexibility as already noted by other responders, but unless you have the TIME to monitor the inverse ETF,s, in effect becoming a day trader, you could get badly hurt by guessing wrong. Example: if you are a gold bug and convinced there is an imminent brealout to the upside given all the financial turmoil and you buy a DOUBLE LONG gold ETF to give yourself twice the leverage, and the opposiite happens as hedge funds and even leveraged individual investors deleverage because of margin calls, it could cost you dearly.
The opposite is equally true, if you are convinced that gold is a "barbarous relic" and the FED bailout program will restore faith in the fiat money system and gold could go as low as $500. as some are predicting then your inclination would be to buy a DOUBLE SHORT gold fund, and if the gold bugs win and enough people pile into the market to give themselves a hedge against further market turmoil over continuing financial breakdowns, (bank failures etc) then those with the SHORTS will get badly hurt.
Decide at your own peril, but remember this simple fact, IF there were a free mrket in gold and silver then based on economic fundamentals the prices based on inflation adjusted dollars compared to the 1980 runup would ALREADY BE IN THE $2000. RANGE FOR GOLD and $50. for silver! The evidence that the prices are being manipulated by the big players is overwhelming, the question is HOW LONG they will have the resources to keep it up.
Answers
3970 points
EthanR answered 8 months ago …
I prefer the ETF's right now. You can have a lot more control over such things as:
1) Buying or selling intraday instead of at the end of the day
2) Some mutual funds, such as Fidelity Select funds penalize you if you sell within a month, so if you get caught in a bear market, you either have to stay the course or pay a penalty.
3) You can use ETF's such as QID, QLD, DXD, DOG, etc to go double long or short an index
115 points
SamCollins answered 8 months ago …
Last week I recommended three ETFs for my Trade of the Day at www.OptionsZone.com, including the UltraShort MSCI Emerging Markets ProShares (EEV), the UltraShort Consumer Services ProShares (SCC) and the Ultra Dow30 ProShares (DDM).
I like ETFs because the 'basket' structure means you don't have to be right about individual names to profit. It's like firing several arrows at one target.
ETFs also allow you to play the downside of the market and sectors, and they trade just as easily as stocks.
1902 points
alanj answered 8 months ago …
It depends on your time frame. I am expecting the market to move up within the next couple of days. If you look at the MACD you'll see that the market is in an intermediate bull trend. Even though the market is in a bull trend, overall this is a bear market that we are in. Going long for more than a few days is very risky. That would pretty much rule out Mutual Funds. But if you are looking for a time to go long for a couple of days now is the time.
If you have a longer time frame watch the MACD of your favorite short ETF. When it changes to a bear (the fast line crosses under the slow line) then buy it. I personally like any of the ProShares ETF's. EthanR gave a couple of good examples.
180 points
kobla answered 8 months ago …
ETF's are great for a day trade,, SMN had a $9 move ,, SRS had a $28 move ,, EEV had a $10 move,, SKF had a $21 move,, on 11-10-08,, in this market I'd think twice about hanging onto them over night,, unless you have stock in Rolaids!!
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474 points
spider348 answered 8 months ago …
ETFs if you want specific index or sector 'diversification'. But like anything else ETF's need a direction to make you money. Currently the direction is up, down, up, down so you will need to choose wisely.
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