Why use ETFs and Market Timing

Exchange traded funds(ETFs) represent a basket of securities that are traded just like stocks at an exchange. They offer, flexibility, liquidity, diversification and above all tax efficiency. It was found that the S&P 500 index beats 80% of all actively managed funds, so it is logical to invest in an ETF that mimic such index. When the investor decides to invest it is better and less costly to invest in ETF than managed funds. The question later arise whether to be invested in all times good or bad, or whether to be invested only in good environment. This is when market timing comes in play.

The last decade showed that buy and hold was a prescription for loss and financial disaster. Remeber the nasdaq was over 5000 in the year 2000. Now after more than 5 years it is bellow half of that. Timing the market could provide effective entries and exists, and will safeguard the investment in bear markets, it will protect the profits, while letting these profits run in positive bull environmnet.

For further details visit our related Links section and choose the part of interest under "ETF Eduaction".