Exchange Traded Funds are becoming the new way to invest in equity markets in the United States. Similar to mutual funds, Exchange Traded Funds are securities that are derived from basket of stocks. Unlike mutual funds, ETFs offer these additional benefits to share holders.
- Instant liquidity – ETFs are traded on stock exchanges and can be traded nearly instantaneously
- Lower fees & Taxes – Much more efficient to reduce fees and tax liability
- Margin & Options – The ability to trade on margin and execute options (puts, calls, etc)
- Short – The ability to short ETFs if anticipated downturn is expected
The most often cited disadvantage to ETFs are commission expenses buying and selling ETFs but with the creation of commission free brokers like Zecco and the recent announcement by Bank of America to offer commission free trades, this argument is quickly becoming mute.
Another cited disadvantage is that ETFs don’t necessarily trade at the net asset values of their underlying holdings, meaning an ETF could potentially trade above or below the value of the underlying portfolios but that is to be expected with the greater volatility as a result of the margin, shorting, and trading capabilities of ETFs.
Each Friday, I’ll post a report from a custom application called the ETF-Cashinator™ which highlight some high yield returns via covered calls on some Exchange Traded Funds. This application scans all the ETFs with the appropriate criteria and returns the highest yielding ETF Covered Calls.
Why Friday? This website isn’t about day-trading but about investing prudently to achieve superior returns. Posting reports on Friday allows me time to further research an investment over the weekend and determine whether or not to take action on Monday. I encourage everyone to do their own due diligence before investing in any security.
This website is for educational and entertainment purposes only. Any investment activity is not without risk including loss of principal. Neither this website nor its authors assume any responsibility arising from the use or misuse of any information presented in this blog. You are urged to contact a financial adviser before making any investment decisions. Past performance is no indication of future performance.