The Traderszone Network

23 April, 2009 by James McBride

Outperforming The Market: Is More Leverage Better?

Over the past year or so, leverage has been a key component in many new and top-performing ETF’s. Astute traders using leveraged and/or inverse funds have seen outsized gains compared to more traditional vehicles.

However, owning a leveraged or inverse ETF definitely won’t guarantee a profit. In fact, with leverage, if your underlying isn’t on any of the latest “hot” lists or pundit-promoted investment-of-the-week picks, there’s a good chance you could wind up disappointed. Or, if you’re a faithful adherent of the risk reduction philosophy, spending a long time fighting your way back to some type of profitability.

Leverage (TV series)

Part of the problem (and the benefit) of going for the super-sized returns that pumped-up inverse and leverage funds offer is that if you’re right, you can become wealthy—fast. But if you’re wrong, well, the inverse can happen, with a multiplier effect.

As new ETFs come out offering an ever-widening array of ways to deal with the markets, it’s going to become imperative that independent-minded traders understand the long-term implications of these vehicles. And that means putting into perspective how a well-rounded sector allocation will play out, employing robust risk-management (most likely longer-term puts and collars) and simply knowing what you’re buying and why you’re buying it.

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20 April, 2009 by James McBride

Most Actively Managed Equity Funds Fail To Perform

According to a new report from Standard & Poor’s, more than 70% of all actively managed U.S. equity mutual funds trailed their benchmarks for the five years ending 2008. The S&P’s Index Versus Active Fund Scorecard (SPIVA) showed that 71.9% of actively managed large-cap funds lagged the S&P 500, while 75.9% of actively managed mid-cap funds trailed the S&P MidCap 400. In addition, 85.5% of actively managed small-cap funds fell behind the S&P SmallCap 600.

The only bright spot was Large-Cap Value ETFs, which did better than the S&P 500 Value index in 2008, with 78% of actively managed funds beating their benchmark. S&P says the results were consistent with the previous five-year cycle which ran from 1999 to 2003. The results of the study prompted an S&P spokesperson to speculate that the belief that bear markets strongly favor active management is largely a myth.

Check out for more on this story.

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17 February, 2009 by admin

Exchange-Traded Funds Assets To Top $1 Trillion is reporting that exchange-traded funds assets globally will top $1 trillion within two years. ETF’s attracted over $176 billion in 2008 and U.S. ETF assets already top the $500 billion level.

As of late 2008, over 1600 ETFs around the world had $658 billion in assets with more than 600 planned to launch in the U.S. and Europe during the next year. Additionally, another 274 related exchange-traded products are coming to market worldwide with an estimated $59.5 billion in initial assets.

At the end of 2008 most ETF products showed strong postive money inflows, although the first month of 2009 has showed some serious slippage. This indicates a number of major ETF sponsors have suffered slowdowns in key areas raising concern that the 18-month economic meltdown may be catching up with the industry.

However, during the last year, the money invested in ETFs surpassed 30% of the total volume of equities transacted in the U.S. And 70% of ETF use come in the form of replacements for stocks rather than substitutions of actively managed mutual funds. In addition, ETF assets are skewing more towards retail channels. Individual investors now represent at least half, and possibly as much as 60%, of the total ETF marketplace suggesting a deepening and broadening of the retail ETF market.

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25 November, 2008 by admin

MSCI Launches Islamic Indexes

MSCI Barra is expanding the MSCI Global Islamic Indices to include
small-cap emerging market stocks and a set of frontier market
countries. With the addition of 16 frontier markets, the total number
of MSCI Islamic country indexes will rise from 53 to 69.

Index providers have targeted the Islamic investing world as an area
of growth for benchmark construction, as both institutions, retail and
government investors across the Middle East and in Southeast Asia
assume a higher profile. Dow Jones recently unveiled its first
Shari’ah compliant benchmark for companies in Southeast Asia, and the
total assets invested in Shari’ah compliant indexes is growing sharply.