New Option TraderLearning how to be a successful option trader and blogging about it

ETFs (Exchange Traded Funds) by now are pretty common place.  SO, wouldn’t it be nice if our 401(k)s could have ETFs in them instead of mutual funds? Not sure how soon (if ever) we’ll see that because if it did happen what would the Vanguards of the world do?

Okay, fine.  But, given the huge advantages over mutual funds they’re definitely the way to go if you want diversification, a better return, and tired of all the extra fees that come with mutual funds.

Here’s a quick review of the advantages ETFs have over mutual funds:

• Available for all major indices (Dow, S&P 500, Nasdaq, Russell)
• Available for all major sectors and countries (Oil, China)
• Lower expenses because they’re index based — not actively managed
• Can be traded throughout the day — not just at the end of the day
• Can be shorted without an up-tick
• Options available on most ETFs

ETF Watch List

• Broad market indices (DIA, SPY, QQQQ, IWM, MDY)
• Sectors (Energy, Health Care, Semiconductors)
• International (Japan, China, Brazil)
• Other Asset Classes (Commodities, Treasury Bonds, Currencies)

What Makes a Good ETF?

• High volume and consequently, liquidity
• Economic factors occurring (ie, emerging markets, rising oil prices, etc.)
• Hot markets and/or healthy indices (technology, Nasdaq)

Good ETFs to Trade Now:

ETF Resources

• Yahoo Finance – ETFs
• Amex
• Holders
• iShares
• Select Sector SPDRs
• ProShares
• Seeking Alpha