Frequently Asked Questions
A: Yes they are. Since my account is held at Questrade and all my subscribers will see my account every month, dividend and trading commissions are included, and transparent.
A: I could write a book on that, and there are many, to answer this question.
ETFs give you access to a whole world of investment options, covering a broad range of asset classes, sectors and geographies.
ETFs are typically designed to track an index that represents an asset class such as equities or fixed income. To do this requires that the ETF contains different holdings, and sometimes dozens from within an asset class. Therefore, a single ETF trade can provide instant exposure to a diversified portfolio of securities over an entire asset class. This diversification can help reduce concentration risk in portfolios. It is a single security that trades on a stock exchange yet is comprised of a basket of stocks. ETFs can track specific sectors, regions or countries, and different investment styles. They can be bought on margin, sold short, and options are available to hedge your position. ETFs allow investors to pinpoint sectors of the markets showing strength and just as quickly reverse the position.
ETFs can be a cost-effective way to gain exposure to a diversified portfolio of securities. They are less expensive than investing in actively managed funds. They can also be less costly than purchasing a large number of individual shares, as there are less trading costs.
Like shares, and unlike mutual funds, ETFs provides investors with the flexibility to trade at any time during market hours. Priced throughout the trading day, ETFs can be bought or sold like a share, through any broker, investment adviser, or online trading platform.
ETFs are straightforward and transparent in their investment objectives – to achieve results in line with their market benchmark. They are also highly transparent in their holdings, with many ETF providers updating this information daily on their websites.
No other investment allows investors to use one product so effortlessly in managing both the short and intermediate term.
Q: Since you are Canadian by birth and spent your career in Canada, why do you invest only in US ETFs?
A: Whether we like it or not, the US stock exchanges are the pre-eminent in the world. As a result, those exchanges publish well documented technical information that other exchanges don’t. Things like the TICK Index, the TRIN, the VIX, VXO, many stochastics and oscillators, put/call ratios, sentiment indicators, pivot points, and many many more. Your home exchange will probably have these same ETFs in your home currency so you can duplicate my buys and sell timing calls.
Q: I remember on one of your TV shows you mentioned Bob Farrell’s “10 Market Rules to Remember”, followed by some of your own. Can you refresh my memory on those?
A: Absolutely. Bob Ferrell was the head of Merrill Lynch Research for decades and during that time he established himself as one of the premiere market analysts on Wall Street. His insights on technical analysis and general market tendencies were later canonized as “10 Market Rules to Remember” and have been widely distributed ever since.
1.Markets tend to return to the mean over time.
Translation: Trends that get overextended in one direction or another return to their long-term average. Even during a strong uptrend or strong downtrend, prices often move back (revert) to a long-term moving average.
2.Excesses in one direction will lead to an opposite excess in the other direction.
Translation: Markets that overshoot on the upside will also overshoot on the downside, kind of like a pendulum. The further it swings to one side, the further it rebounds to the other side
3.There are no new eras – excesses are never permanent.
Translation: There will be a hot group of stocks every few years, but speculation fads do not last forever.
4.Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.
Translation: Even though a hot group will ultimately revert back to the mean, a strong trend can extend for a long time. Once this trend ends, however, the correction tends to be sharp.
5.The public buys the most at the top and the least at the bottom.
Translation: The average individual investor is most bullish at market tops and most bearish at market bottoms. The survey from the American Association of Individual Investors is often cited as a barometer for investor sentiment. In theory, excessively bullish sentiment warns of a market top, while excessively bearish sentiment warns of a market bottom.
6.Fear and greed are stronger than long-term resolve.
Translation: Don’t let emotions cloud your decisions or affect your long-term plan. Plan your trade and trade your plan. Prepare for different scenarios so you will not be taken by surprise with sharp adverse price movement. Sharp declines and losses can increase the fear factor and lead to panic decisions in the heat of battle.
7.Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names.
Translation: Breadth is important. A rally on narrow breadth indicates limited participation and the chances of failure are above average. The market cannot continue to rally with just a few large-caps (generals) leading the way. Small- and mid-caps (troops) must also be on board to give the rally credibility. A rally that lifts all boats indicates far-reaching strength and increases the chances of further gains.
8.Bear markets have three stages – sharp down, reflexive rebound, and a drawn-out fundamental downtrend.
Translation: Bear markets often start with a sharp and swift decline. After this decline, there is an oversold bounce that retraces a portion of that decline. The decline then continues, but at a slower and more grinding pace as the fundamentals deteriorate. Dow Theory suggests that bear markets consist of three down legs with reflexive rebounds in between.
9.When all the experts and forecasts agree – something else is going to happen.
Translation: This rule fits with Farrell’s contrarian streak. When all analysts have a buy rating on a stock, there is only one way left to go (downgrade). Excessive bullish sentiment from newsletter writers and analysts should be viewed as a warning sign. Investors should consider buying when stocks are unloved and the news is all bad. Conversely, investors should consider selling when stocks are the talk of the town and the news is all good. Such a contrarian investment strategy usually rewards patient investors.
10.Bull markets are more fun than bear markets.