Tag: ETF Investing Strategy

Top Performing ETFs Of 2020

Posted on by Matt Thalman

Despite the major market crash in March, all of the major indexes ended 2020 in the green. The S&P 500 (SP500) ending the year up 16.27%, the Dow Jones Industrial Average (DJI) rose 5.58%, and the NASDAQ (COMP) increased by 43.64% in 2020. While at times it felt as if there was a major disconnect with the economy and the stock market, and it still does to an extent, most of the year, it felt like no matter what you were invested in; you were making money. But, while not all stocks increased the same amount, the same is true about ETFs. Some funds, like stocks, did better than others.

When you look back at the year now, did you match market returns, fall behind, or where you invested in stocks and ETFs that beat the averages? Let’s take a look at the top five best performing ETFs of 2020 in a number of different categories the average investor has to choose from.

The following table shows the performance of the top five best performing ETFs in 2020, as well as their performance over the last month, the last three months, the last five and ten years. (All figures quoted are based on the December 31st, 2020 closing price. Five- and ten-year periods are annualized when available.)

ETF

The following table shows the performance of the top five Non-Leveraged ETFs in 2020 and their performance over the last month, the last three months, the last five and ten years. Continue reading "Top Performing ETFs Of 2020" →

The Problem With Bond ETFs Right Now

Posted on by Matt Thalman

One of the first things an early or new investor is typically told is that bonds are safer than stocks but will offer lower capital appreciation than stocks. Or in simpler terms, bonds are less risky, and, therefore, they offer a lower reward. But in reality, these things we are taught about a bond's risks are not always true, depending on how you are invested in the bond, bonds, or a bond ETF.

Most people speak of the risk profile when they are talking about low risk. Low reward bonds is a scenario when the investor holds the individual bond themselves. Like stock ownership, a bond investor can buy individual bonds and hold them in their portfolio.

Let's quickly look at how and why bond prices change before we go any further. Say you buy a 1-year bond for $980.00, and when it matures in a year, it will be worth $1,000, meaning the bond you bought is yielding a 2% rate of return. Now let's say you hold the bond for the full year; you will make your 2% or $20 and be happy. Your only risk in this scenario is that whoever sold you the bond defaults on it, which for this example, is probably not likely. (The higher the interest rate on the bond at the initial time of sale typically indicates how risky the bond is and how likely the bond seller is to default. 2% is a very low risk in normal market conditions.)

If you plan to hold and ride the bond to mature, bonds are very low risk, as we have all been taught. However, if you plan to sell the bond before maturity, you are increasing your risk. For example, when you own the bond we spoke about above, that is paying a 2% rate of return, if the current market is demanding say a 4% rate of return on bonds, then to sell your bond, which you paid $980 for, you would have to offer another investor a 4% rate of return, or sell the bond at $960, so the buyer could realize a 4% rate of return, which is the current going rate for a bond if they held the bond to maturity. Continue reading "The Problem With Bond ETFs Right Now" →

ARK Investments ETFs Have Been Top Performers

Posted on by Matt Thalman

After a historic November, the best month the market has seen since January 1987, I found an interesting Exchange Traded Fund trend; one ETF manager has three of the top ten best performing ETFs of 2020. Furthermore, what makes this one fund manager even more impressive is this performance when you run the screener and leave leveraged funds in play, even though none of the ARK Invest funds are leveraged products themselves.

So not only are these three funds not leveraged and therefore exposing you to more risk than you may want, but they are beating other leveraged funds. One of the main ways ARK is likely to show excellent results in 2020 is its different way of thinking about investing. They state on their website this belief.

"Not Your Traditional Investment Manager

The world is changing rapidly. While traditional investors seek safety in benchmarks and passive strategies, ARK believes this behavior is counterproductive. Innovation is causing disruption and the risks associated with the traditional world order are rising. We strive to invest at the pace of innovation"

The fund managers certainly see themselves as a little different than others on Wall Street, and this year has undoubtedly proven what they are doing is beating the rest of the pack.

So, how great was the performance of Ark's fund thus far? Continue reading "ARK Investments ETFs Have Been Top Performers" →

Marijuana ETFs are Moving

Posted on by Matt Thalman

Since the elections in early November, marijuana stocks and marijuana ETFs have been moving higher at a healthy clip. Now may be a perfect time for investors who have been waiting to get into this industry but didn’t want to be too early.

The moves come after four States passed the legalization of recreational marijuana use, which now brings the total number of US States to 15 that allow citizens to consume marijuana in essentially the same manner that someone’s consumers alcohol.

Furthermore, 2 more States passed laws allowing marijuana to be used for medical purposes. Now the US has 35 States that allow medical marijuana usage.

Another catalyst is that with Vice President Joe Biden winning the White House, many believe the push for national level decriminalization of marijuana is more likely to occur. This is even though the Republicans still control the Senate.

Finally, as I have mentioned before, with the pandemic and massive budget deficits occurring all around the country, State and local governments, and even perhaps the Federal government may start looking at alternative ways to increase tax revenue. One easy avenue is to allow marijuana use and place a hefty tax on it, as the government already does with alcohol and tobacco sales. As things currently sit in most States, those that have not passed the legalization of recreational use would argue that marijuana is being sold; it’s just not being taxed. Most politicians would probably agree with that to some extent, and some would undoubtedly love to get some more tax money, especially during times like these. Continue reading "Marijuana ETFs are Moving" →

Using ETFs To "Time" The Market

Posted on by Matt Thalman

Most legitimate market participants will tell you not to try and ‘time’ the market. What they mean by that is don’t try and predict when the market is going to fall and when the market is going to climb higher. Historically, this has been extremely difficult to predict with any real accuracy, but ETFs could make it easier for you to accomplish.

So, most advisors tell clients to stay invested in the markets and ride the ups and downs. I fully agree with this thinking because it is very difficult to predict major market moves. For example, while some people did predict the market would crash in March, not so many thought it would tear right back higher as quickly as it did. Even those who did predict the move higher had a hard time predicting wh the bottom of the fall was and when the actual bottom was and, therefore, the absolute ‘best’ time to get back in.

The biggest problem with trying to time the market is that you will miss part of the moves back higher. And knowing when the right time to get back in is more difficult than just riding it out the wave up and down.

Think about it this way. If you sell ABC stock at $100 because you think the market is about to crash. And let’s say that you were right about the market falling. When do you repurchase ABC? Continue reading "Using ETFs To "Time" The Market" →