Using ETF and Mutual Funds to Make a Killing in the Market

Financial Analyst and Activist Darnell L Williams

Making Money in Diversifying Your Small Portfolio

One thing that I learned decades ago is don't buy "Opened Ended" Mutual Funds. Most "Open Ended" Mutual Funds have a built in charge of 5% and could have another 8% charge from some brokers. That means that the fund makes money on you, regardless of what the fund does. If you have a 401K at work and they do not give you matching funds, this charge comes directly from your pay.

 

I buy Exchange-traded funds (ETFs) or "Close End" Mutual Funds. They offer investors the ability to diversify over an entire sector or market segments in a single investment. Let's look at the basic information of an ETF.

Click on the picture or the link to see the video on ETFs. Use this blog as a course on ETFs and Mutual Funds. Don't try to read this in one sitting. Take a section of this blog at a time and remember to take notes. I idea is to learn the information, not to get through the blog.  

Lesson 1: Introduction to ETFs

https://www.youtube.com/watch?v=FcXn7eR3RAo

Investopedia Video: An Intro To Exchange-Traded Funds (ETFs)

Question: How do Mutual Funds and ETFs differ?


Lesson: 1.1

This will give you some idea of an exchange-Traded Funds.

https://www.youtube.com/watch?v=0qUPGc8wbMM

ETFs 101

Question: This explains the most basic information on ETFs.

This is an introduction to an ETF. This explains how they work but you don't really know this to invest.

Lesson 2: Learning Advanced Lessons on ETF

https://www.youtube.com/watch?v=fT7h-TxAUvI

How to Diversify with ETFs

Uploaded on Mar 14, 2011

The fund's prospectus contains its investment objectives, risks, charges, expenses and other important information and should be read and considered carefully before investing. For a current prospectus, visit www.etrade.com/etf.

Exchange-traded funds [ETFs] are subject to risks similar to those of other diversified portfolios. Although ETFs are designed to provide investment results that generally correspond to the performance of their respective underlying indices, they may not be able to exactly replicate the performance of the indices because of expenses and other factors. Also, there are brokerage commissions associated with trading ETFs that may negate their low management fees. ETFs are required to distribute their portfolio gains to shareholders at year end. These gains may be generated by portfolio rebalancing or the need to meet diversification requirements. ETF trading will also generate tax consequences.

Diversification does not ensure profit or protect against loss in declining markets.

1. Question: Can ETFs trade like stocks?

2. Question: How are ETFs and Mutual Funds alike?

3. Question: Who has lower cost, ETFs or Mutual Funds?

4. Question: Which one can you use "Stop Orders?"

5. Question: When a stock takes a big hit in the market, how will it affect your ETF?

 

Lesson 2.2 

https://www.youtube.com/watch?v=xZeDJ2bdBoE

Be careful of ETFs - MoneyWeek Videos

1. What are the advantages of investing using ETFs?

2. What are the disadvantages of investing using ETFs?

Exchange traded funds (ETFs) can be a great way to invest in the stock market or commodities. They're cheap, simple and easily traded.

However, a fair number of ETFs are riskier than people realize. If you're not up to speed on the different types of ETF, you could end up losing money unexpectedly.

So in this video, we're going to explain how ETFs work and highlight the types of ETF that are especially risky.

Watch 'Be careful with ETFs' to find out more.

Like this MoneyWeek Video? Want to find out more?
Go to: http://www.moneyweek.com/youtube now and you'll get a whole host of other videos.

Lesson 3: The Problems with ETFs and Mutual Funds

Now that you know about ETFs. Let's look at the pros and cons of ETFs. Let's look at the dark side of ETFs by clicking on the picture or the link.

 

https://www.youtube.com/watch?v=dPeMH7CekhU

Dark Side of ETFs CNBC

 

Lesson 4: How You Can Make Money

Here is how I believe you should use this in the Oil Market!

Knowing  all this information, I am ready to tell you what to buy in relation to ETFs and close end funds. As I told you in resent blogs, I think investors should start investing in the oil market using a "Buy and Hold" Strategy. That means you buy shares a little at a time every pay or every month and wait until gas is selling for $4.00 per gallon and the media is talking about the world is coming to an end because of the gasoline market.

Here are my recommendations;

Look these three up to get the current price, using the computer symbols; sco, uco, and uso.

1. ProShares UltraShort Bloomberg Crude Oil (SCO)

The investment seeks to provide daily investment results (before fees and expenses) that correspond to twice (200%) the inverse of the daily performance of the Dow Jones—UBS WTI Crude Oil SubindexSM. The fund invests principally in any one of or combinations of Financial Instruments, including swap agreements, futures contracts or forward contracts with respect to the applicable Fund’s benchmark to the extent determined appropriate by the Sponsor.

2. ProShares Ultra Bloomberg Crude Oil (UCO)

The investment seeks to provide daily investment results (before fees and expenses) that correspond to twice the daily performance of the Dow Jones—UBS Crude Oil Sub-IndexSM. The fund invests primarily in any one of or combinations of Financial Instruments, including swap agreements, futures contracts, and options on futures contracts or forward contracts with respect to the applicable benchmark to the extent determined appropriate by the Sponsor. It invests other assets in cash or in cash equivalents and/or U.S. Treasury securities or other high credit quality short-term fixed-income or similar securities that serve as collateral for the financial instruments.

3. United States Oil Fund LP (USO)

The investment seeks to reflect the performance, less expenses, of the spot price of West Texas Intermediate (WTI) light, sweet crude oil. The fund will invest in futures contracts for WTI light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas and other petroleum based-fuels that are traded on exchanges. It may also invest in other oil interests such as cash-settled options on oil futures contracts, forward contracts for oil, and OTC transactions that are based on the price of oil.