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Holding equity positions during a sustained market downturn can decimate a portfolio. An alternative is to adopt a trading methodology that inserts capital into the market at safe entry points as a favorable trend emerges, then removes capital as the trend breakdown. Bill Poulos has compiled such a method in his ETF Profit Driver course.
Based on a study conducted a few years back, about 10% of all long-term mutual-fund assets were held in index funds. Those funds offer comparatively low fees track indexes familiar to most investors. The drawback of index fund investing has been holding those positions during market downturns.
In the past several years Exchange Traded Funds have started opening up significant new investment strategies. While Exchange Traded Fund behave much like traditional index mutual funds, they have key differences.
Exchange Traded Funds are actively traded on electronic exchanges, allowing you to open and close positions during market hours. They also offer highly liquid option chains, further expanding their use as an investment and trading vehicle. In comparison, mutual funds are not exchange traded and your order to open or close will only be filled at the market close.
As a result of this expansion of Exchange Traded Funds, small investors are gaining access to a growing array of different exchange-traded index products. Each year, numerous new Exchange Traded Funds are launched, tracking everything from clean-energy stocks to the nanotechnology industry.
A key driver in the popularity of Exchange Traded Funds is the failure by many mutual-fund managers to beat the market for extended periods of time, even as they collect big management fees. Instead, many advisers have turned to a strategy of lower-cost index funds, and increasingly, Exchange Traded Funds.
Exchange Traded Funds rising attractiveness also stems from the mutual-fund trading scandals of recent years. Because mutual funds are priced only once a day, after the market closes, some insiders used strategies designed to profit at the expense of the little guy. Exchange Traded Funds are priced like stocks, however. This means tat they trade throughout the day and are not vulnerable to these scams.
Each method taught in the ETF Profit Driver course identifies a safe point in the market to open a new Exchange Traded Fund position. As such, you enter when market risk is at a relative low. Bill Poulos' money management rules then force an exit from the position, preserving capital and locking in profits, if and when the trend begins to fail.
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