Trade The Markets Like A Billionaire: Use Exchange Traded Funds

One way to tell the quality of investments is to watch what the smartest, richest hedge fund managers do. These are the smartest traders, the biggest players in the market. They won’t settle for anything but the best possible ways to do everything.

When they fly, they use a G4 private jet. When they drink wine, they drink $1,000 bottles of wine. When they buy a house, they spend $50 million.

So if you want to buy Gold, shouldn’t you at least find out what these managers do when they buy Gold?

When big hedge fund managers use Exchange Traded Funds to buy gold, bonds, or real estate, pay attention. They have access to the best of everything – and these sophisticated investors are using Exchange Traded Funds (ETFs) to get access to the markets they want.

John Paulson – the biggest fund manager in the world – uses ETFs to trade!

That’s right – the biggest hedge fund manager in the world uses Exchange Traded Funds. He uses the same products you can trade in your own stock account. Here is a typical article explaining what he’s doing with gold.

“In its quarterly filing on stock holdings for the first quarter, Paulson & Co. said it held stakes in gold-related companies Allied Nevada Gold Corp. (ANV), Anglogold Ashanti Ltd. (AU), Barrick Gold Corp. (ABX) and exchanged-traded fund SPDR Gold Trust (GLD) as of March 31.”

But why would a hedge fund manager do this?

Enter the ETF: Exchange Traded Funds

ETFs are one of the great financial innovations of the last century. They are a remarkable tool for any investor, because ETFs:

1. Give you access to tons of markets, here and around the world

2. Can be a low cost way to access these markets

3. Can be extremely liquid

Even better, they offer these benefits inside of a standard stock account. If you have a stock account, you can trade Gold, Corn, Bonds, Real Estate, and foreign markets in a low cost and highly liquid manner.

ETFs offer all of these benefits. I highly recommend using ETFs for most of your investing, because you can get almost anything you want, nearly instantly, at low costs.

If you have your investment money in a mutual fund, you might find you can get exactly the same fund for a fraction of the cost in an ETF. I highly recommend you contact me to determine if you can save thousands of dollars just by switching to ETFs.

Get Access to Any Market

Finding good investment ideas can be hard, or easy. Figuring out the U.S. dollar will get less valuable doesn’t take the investment skills of Warren Buffett.

But finding a way to actually make money from insight like this used to be nearly impossible.

If you wanted real exposure to gold, commodities, bonds, or foreign markets, good luck. It was extremely expensive, very risky, and nearly impossible to do on your own.

Here is a partial list of what you can access with ETFs:

· All U.S. Stock indexes

· Specific Stock investing Strategies like Value and Small Cap

· Specific Stock Sectors like Bio-Tech, Utilities, and more

· Bonds Strategies of all types and varieties

· Specific Bond Classes like 7-10 year Government Treasuries

· Commodities like Gold, Oil, Natural Gas, Corn, Copper and more

· Currencies like the USD, Euro, Japanese Yen, Australian Dollar

· Real Estate

Now, I am a professional investor, and when I see this list, I think $$$$ for my clients. All of a sudden I can offer hedge-fund-style strategies to my friends and family who have smaller accounts. I can offer kick-ass investing ideas to my clients and do them in stock accounts.

Today, you can short the U.S. Dollar through an ETF with a few clicks of a button, inside your stock account. You can buy Gold and Silver directly in your stock account. Being able to add specific bond purchases to my clients account makes a world of difference to their returns.

Getting access to the world of investing at a low cost, in a very liquid market, inside of a stock account is like a dream come true.

Low Cost ETFs: Wow!

Back in the 1980’s, just getting access to a good stock mutual fund was hard, and usually expensive. You needed to sign up with a specific provider, and then purchase their mutual funds. Many of these funds had fees of 4% per year or more.

4% is a huge fee. On a $100,000 account, that’s $4,000 per year. After 10 years, that’s $40,000. You can buy a decent car with this much money. It’s hard to beat the market when shelling out thousands of dollars every year.

ETFs are among the lowest cost ways I’ve ever seen to access the markets. The ETF for the S&P 500 only charges .09% to access the stock market. This is as close to free as possible.

And that’s not it – you can trade ETFs for free at several brokers. Merrill Edge lets you trade ETFs for $0 as long as you have $25,000 in your account. eTrade offers 100 different ETFs you can trade for free.

It’s incredible, but you can have an active trading strategy and never pay a cent in brokerage costs. Remarkable.

Liquidity and ETFs: Great for us

Exchange Traded Funds can be like Mutual Funds – they both give you access to diversification. But ETFs have 1 huge advantage over mutual funds – liquidity.

You can buy and sell an ETF at any time. This is one of the biggest benefits of ETFs. Getting into an investment can be very easy – but the selling, the getting out of an investment can be very difficult.

This is where ETFs really shine. The ETFs used in the EZ ETF system have tons of liquidity, so you can get in and out of the market easily, but many, many ETFs have liquidity.

Trade Like a billionaire: Use Exchange Traded Funds

There are strong reasons hedge fund guys like John Paulson use ETFs to trade. They could use anything they want, but they use ETFs for the same reasons you should consider ETFs.

The market access, low cost, and liquidity should be enough to change your mind. But having all this inside your stock account is a real benefit.

Copyright (c) 2012 Trend Following 101

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