First published in Automated Trader Magazine Q3 2010: http://www.automatedtrader.net/articles/sponsored-articles/50703/etfs-use-the-right-tool

Planning to trade ETFs with ordinary stock algos? Don’t. While ETFs may be marketed as a basket of securities that are as tradable as their individual constituents, their actual trading behaviour is very different. Gary Stone, Director of Trading Research and Strategy and Ron Taur, Head of Algorithmic Trading, at Bloomberg Tradebook explain the difference in cold hard numbers.

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http://www.cakefinancial.com

Today’s energy markets are booming, and that’s fueled demand for new ways to invest in the sector—including exchange-traded funds, or ETFs.

ETFs are investment vehicles. They work much like index mutual funds in that they hold assets in quantities mimicking an index. But, unlike mutual funds, ETFs trade on an exchange, like a stock.

Energy ETFs are simply ETFs that track energy-related securities. Some of them track broad market indices, such as the Dow Jones U.S. Energy Sector Index or the Goldman Sachs Natural Resources Index. Other track specific sub-sectors, such as oil, natural gas, or alternative energy. You can even get energy ETFs that invest only in foreign stocks.

Most investors won’t want to make energy ETFs the bulk of their portfolio—it’s simply too risky. But energy ETFs can be a good diversifier. That’s because they can help hedge your portfolio against rising energy prices, which can drive up inflation and drive down the prices of stocks.

The Best Way to Manage Your Investments. http://www.cakefinancial.com

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The Treasury Inflation Protected Securities ETF
(stock ticker symbol: TIP)
has a dividend yield of 6.81% according to ETFConnect.com
and Fidelity.com (although Yahoo!Finance says N/A).

How is it possible for the fund to have such a high yield,
when the underlying treasury securities only yield about
2% to 2.5%?
Specifically why is the yield on the ETF so much higher than the yield on the underlying notes…

The yield on TIPs adjusts with inflation. I think they are guaranteed a 2-3% yield above inflation. In addition, like all bonds, the price of a TIP bond will rise and fall inversely with inflation. TIPs have been doing horrible lately with inflation. According to morningstar, the one year total return (price and dividends) for TIP has been less than 1%!!

I think the yield on the underlying notes must be 2-2.5% ABOVE THE INFLATION RATE. When you add an inflation rate of 4%, you get the yield mentioned.

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Huge Opportunity Now Available For Smart Investors to Supercharge their Portfoilio’s with the Power of Exchange Traded Funds….

Link To Free Report: http://www.bestetfperformance.com/blog/free_report

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http://www.todaytrader.com. Day trading in stocks is both risky and difficult. Please consult your financial advisor before attempting to trade actively. TodayTrader is not responsible for any content that may be viewed on this channel. These videos are not meant to be recommendations in the market. Day trading equities requires a retail account balance of at least $25,000 and must remain at or above this level to trade stocks actively. This website is not a solicitation to buy or sell securities, options, or futures. The purpose of this content is educational only.

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