ETFs Are Great But Make Sure You Know Their Quirks

with Gary Stroik, Chief Investment Officer, WBI Funds
Exchange Traded Funds (ETFs) offer a lot more flexibility over mutual funds, typically focus on specific sectors such as technology, bio-tech, commodities, international bonds, etc., and can be structured to offer tax benefits. ETFs were founded as an inexpensive way to get broad exposure to different sector indices, and has been one of Wall Street’s most successful products. They exist under a special exemption granted by the SEC to open-up choice for investors. There’s such a broad range of ETFs available in the market today that virtually every investor can find one or more ETFs that cater to his portfolio’s specific needs – everything from hedging exposure to Greece to playing the Japanese or BRICs markets and more.
But ETFs carry hidden dangers such as unexpected tax consequences, enhanced volatility or inverse and double inverse relationships that most investors aren’t aware of, so make sure you understand your ETFs core focus and its sensitivity to the sector parameters you’re interested in trading.
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