Posts belonging to Category Exchange-Traded Funds (ETFs)

Approach Actively Traded ETFs with Caution


A recent change in policy by the SEC could have a significant impact on the risk profile of some ETFs. In response to pressure from the industry, the SEC has lifted its moratorium on the use of derivatives by certain exchange traded funds. This move is expected to result in an increase in the number […]

Invested in Hedge Funds? You’d Better Think Again!


Hedge funds have long been a quagmire for investors according to informed observers. Nevertheless, they somehow attract money with the lure of spectacular returns despite actual poor performance. Hedge funds traverse high-risk and often exotic territories and cannot be readily liquidated. More often than not, they are doomed from the outset by very high management […]

Will Alternative Investments Fuel the Next Financial Debacle?


Investors are being sold more and more alternative investments and large broker-dealers are ramping up to supply that demand, according to the Wall Street Journal (“Alternatives Get a Boost”). The trouble is that most investors do not fully understand these products and their brokerage firm advisers do not fairly explain the risks and problems associated […]

Many ETF Investors May Not Be Buying What They Think They’re Buying


Exchange traded funds’ names can be misleading. Many have names that suggest that they make certain types of investments when, in fact, they contain only a nominal amount of such investments. Examples provided by the Wall Street Journal include a an ETF called “Middle East & Africa” that invests only 5% of its funds in […]

Number of ETF Failures Jumps


There are about 1,500 exchange traded funds on the market today. The recent boom (and bust) of new exchange traded products is mostly in the smaller, exotic and niche end of the spectrum. The problems associated with such products include lack of performance history, illiquidity, volatility, over concentration, and sometimes (for the funds themselves) death.

Insurance Companies Raise Red Flags on Certain Alternative Investments


The recent actions of errors and omissions insurance carriers should serve as a major red flag to investors. Many of these carriers are refusing to issue coverage for sales of certain alternative investments. In other words, these carriers have determined that the risk of loss associated with the sale of certain alternative investments is too […]

More Small Exchange Traded Products (ETPs) are on Death Watch


Large numbers of exotic and niche exchange traded products (both funds and notes) have either folded or are on a “death watch.” One such fund, according to John Waggoner of USA Today, has not traded since January (“Some exchange traded funds in ER”).

Respected Expert Warns of ‘Financial Train Wreck’


Too many investors speculate rather than invest according to John Bogle, the founder of the Vanguard Group and the creator of the Vanguard 500 Index Fund, which tracks the S&P 500 stock index. Investing means buying and holding; trading (frequent buying and selling) is speculation. Speculation is what happens when sales people act as financial […]

The Risks of Junk Bonds Grow


The Federal Reserve’s recent announcement of the new stimulus package has resulted in another stampede by investors into higher-risk high-yield (junk) bonds. Inflows into junk bond funds were the second highest ever and the highest for this year. Even lower grade borrowers are selling junk notes in the U.S. at an “unprecedented pace” (“Junk-Bond Fund […]

Avoid Small ETFs (Exchange Traded Funds)


Tiny exchange traded funds present significant risks to investors. The problems associated with such funds may include overconcentration, high fees, illiquidity, lack of transparency, and wide trading spreads.