DID ETFs CAUSE THE SELL-OFF?

Topics:
By seadmin

I have read and heard multiple commentaries this past week on how the proliferation of ETFs contributed greatly to the grandeur of the current market decline. That’s like saying the invention of the light bulb contributes greatly to the adverse affects of a blackout.

Whenever you get a big sell-off in the market, you seem to get people out there blaming the tools for the decline rather than the intentions of those who use the tools. To give you another apt analogy here, it’s like blaming the gun for killing someone rather than the person who squeezed the trigger.

Now I will acknowledge that ETFs have contributed to the overall increase in the volume of shares traded, and they do contribute somewhat to the increased volatility in the market — both on the downside, as well as the upside. But the increased trading volume we’ve seen in this market has more to do with hedge funds ratcheting down the level of risk in their portfolios. Sure, they are using ETFs to do this, but that doesn’t mean that ETFs are causing their sentiment. The sentiment exists and ETFs are merely the tools by which investors are choosing to implement that sentiment.

If anything, this past week is a great example of the virtues of ETFs. If hedge funds find them the most convenient way to move big money in and out of the market, shouldn’t it be obvious that ETFs are indeed very efficient tools to accomplish this task?

On my radio show, I’ve been telling listeners that depending on the conditions in a given market environment, there are certain tools you want to have at the ready that will help you to take advantage of those conditions.

At this time, I want all of my Alert readers to become familiar with bear market funds. These are mutual funds and ETFs designed to go up when the market indices are going down. It’s like betting on the Don’t Pass line at the craps table. In these funds, you make money on the short side, while long investors are losing their shirts.

To help you all become familiar with bear market funds, I have included a link to our complete Bear Market Report. This PDF file lists all 67 bear market funds (40 mutual funds and 27 ETFs), along with their recent performance data. This report provides a portrait of the entire bear market fund landscape. You’ll see that there are many varieties of bear market funds, including sector and leveraged bear market funds.

To get your very own copy of the Bear Market Report, just click here.

Log In

Forgot Password

Search