The Dow Jones Industrial Average is one of the most widely-followed stock indexes in the world, seen as a barometer of U.S. equity market performance. The rise of the ETF industry has given investors the option to track the performance of this benchmark, and a number of spin-offs have increased ETF options for investing in the Dow. But before buying into one of the Dow ETFs available, investors should be aware of the potential drawbacks and limitations that an ETF based on the DJIA may have. [click to continue…]
Leveraged ETFs have quickly become the hot-button issue in the ETF industry, dividing investors and observers into two distinct camps. On the one side are sophisticated day traders who believe these funds, which use derivatives and other complex financial instruments to provide amplified daily returns on a target index, are the greatest thing since sliced bread. And on the other are those who accuse these ETFs of being fundamentally dishonest in nature – products that, in the words of legendary investor Jack Bogle, “verge on insanity.” Personally, I fall somewhere in between, believing that leveraged ETFs can be an incredibly powerful tool for sophisticated investors, but acknowledging that there exists the potential for these funds to be used in a detrimental manner by investors unaware of exactly how they function. And while I’m generally inclined to let things be, it’s becoming increasingly clear that this issue will not be going away any time soon unless we address a few key issues. [click to continue…]
