Anyone here just trading a basket of ETF's instead of stocks? I'm wondering if it has merit, easier to control, less negative surprises. Maybe lower volatility but more sure and steady whereby one can load up individual sizes positions larger. Any thoughts?
Definitely, trading just ETFs is totally fine. These days you have ETFs on almost everything . . . so much to choose from. Some of the advantages as you’ve already pointed out would be: Diversification, there are ETFs on many uncorrelated market, equities, various countries, sectors, commodities, currencies, etc. No huge overnight gaps against you as can be the case with single stocks (although there can always be a once in a life time surprise, eg. earthquake, covid, war, weather) You can risk bit more (within reason) on ETFS then you would on stocks. Execution is easy, you can use market orders (unless you trade very illiquid ETF) The disadvantage would be that you’ll miss on some of the huge moves that you could catch with single High-Beta stocks. Also, some of the less liquid ETFs don’t pattern up as well as do the very liquid ETFs.
Nothing wrong with ETFs - some of them can outperform the indexes more then 10 fold in the right conditions. 2020 ETFs Covid Panic lows to 2021 high QQQ 147% 422 days SOXL(3x) 1,850% 440 days FNGU(3x) 1,881% 413 days LABU(3x) 1,236% 229 days TECL(3x) 1,068% 428 days FAS(3x) 875% 405 days
Just don't trade ETFs (many of those) with no volume...also I would not trade managed ones like Katy Woods' and others...stick to sectors, cover call etfs, maybe single stock etf
I found this interesting..... What Are Single-Stock ETFs? ......Unique Risks .......Because of how leveraged and inverse ETFs (including single-stock ETFs) are constructed, they tend to have a negative roll to maintain the proper derivatives position geared at returning a multiple of daily performance. This means that they naturally exhibit time decay and will tend to lose value over medium and long holding periods, regardless of the performance of the underlying assets. As a result, these products are intended only for day trading or very short-term holding periods. Single-stock ETFs also may be prone to quickly lose value in volatile markets. An interview posted July 15, 2022, on Yahoo! Finance illustrates this point. Yahoo! Finance anchor Jared Blikre said, “If we take a hypothetical stock and it’s three times leveraged ETF, and we just kind of chop around with some volatile action. Let’s say they both begin at $100. And then let’s say we have a 20% up day followed by two 10% down days, a 20% up, a negative 20%, a negative 10%, another [negative] 20%. At the end of the day, guess what, the stock is worth $100.78, basically flat. Guess what, the ETF lost 40% of its value.” https://www.investopedia.com/single-stock-etf-5667162
%% Good point$; good percent, cents + %. ''Disadvantage??'' LOL sure if you are WO'N [IBD founder]+ by the way have you sold your IBD Newspaper for $275,000,00o, like he did??LOL Dont forget the evil empire defaulting on its debt, 1988\ SPY rockets down \20% /rockets up SEPT[strange SEPT= up]+ OCT = bear killer No problem mostly if one is a Peter Lynch also; but back to the future,FFTY [IBD50 ] cant even beat SPYor sso almost always.............................................................................I use market order mostly for exits
I used to trade a system based on the sector ETFs of the US industry sectors. It was based on finding the top x best performing sector ETFs and put money on those. I did this for a while, but then, out of curiosity, collected the top 10 positions of each of those ETFs and ran the same system on those individual stocks. The performance was a lot better. So I switched from ETFs to individual stocks. This is an automated system which runs once per trading day. I do hold a basket of ETFs as long term investment. You could call this a regular stock/bond retirement investment portfolio. That's not trading, but investing.
Right now the majority of my portfolio is in QQQ, IWM, and XLE. And its options and it's offshoots: TQQQ, TNA, TZA, ERX, etc I have some individual stocks but for the most part I just like trading options and letting the ETF pick the stocks that they want to trade in.
%% THAT's not ETFs risk + frankly a brief internet thread is no substitute for the annual report+ prospectus............... The risk you noted, Tmickey, is leverage risk + NOT suggested in their literature @ all. ALSO in a tight sideways slop chop=trend , a cash ETF does better. I also like cash metals business also/not really related to stock/ETF market. I still study selected single stocks\not to trade those single stocks ; but to realize liquid ETFs like SPY + such , never moVe as much as single stocks. SPY = liquidity leader + good benchmark Or sometimes SPXS....... LIKE SCHW warns '' NOT suitable for all investors''