Exchange-Traded Funds (ETF) Trading

An exchange-traded fund (ETFs) is a fixed basket of stocks that trades on the stock market just like a stock. A global ETF can represent stocks of a specific country or region or a specific industry in a company or a region. The value of an ETF is determined on a continuous basis by calculating the true NAV of the ETF based on the changing value of the stocks that make up the ETF.

At this time there are a relatively small number of global ETFs, although this situation is likely to change in the future. Barclay’s currently offers more than 28 country and regional ETFs through iShares.

With global funds – whether they are closed-end. Open-end, or ETFs – the stocks are selected to represent a cross-section of the economy of the country or to represent a sector or industry within the country or region. The differences among these global securities are important but often subtle.

Watch the trends. Watch the charts on ETFs to see where the action is.

Apply your investing style. Whether you buy closed-end funds, open-end funds, or ETFs, invest in them as you would with domestic stocks using your particular investing style. For example, once you’ve decided on a country, select an ADR using the same investing style guidelines you would use for selecting domestic stocks. For country funds or ETFs, the growth investor would look for the fastes-growing economy; a value investor might look fro bargain funds in a country that is perhaps having difficult time. One fund manager even says he shops for country fund bargains in countries hit by earthquakes, floods, political coups, or currency devaluations! A momentum investor would be looking for the fastest-moving fund. A technician would simply compare the charts of the funds to see which had the best patterns.

Advance strategies are the province of the advanced investor. The cursory overview in this article is intended simply to give you a hint of what’s available. We are not suggesting that you proceed with any of them without further study. Nor are we suggesting that these are all of the advanced strategies available to the sophisticated investor. There are many more, and new ones continue to surface to meet the demands of investors and the changing marketplace. As with investing in general, considerable study and practice are needed to become adept at any advanced strategy. You might start with the free information that is available on the Internet, the progress to the many related books and seminars.