As new exchange traded funds launch daily, picking the right funds for a portfolio can be difficult. By watching specific ETFs, investors can gain insight into the market and focus on trends that are worthwhile.
“Fortunately, out of all those ETFs, only a few really warrant a lot of attention in the current market environment,” Dan Caplinger for The Motley Fool wrote. Here are four ETFs he thinks are worth your attention right now:
- United States Natural Gas (NYSEArca: UNG) Gas producers have slowed down production due to the extremely low price of natural gas. Prices could be reaching a bottom, leading to a bounce in price for this commodity. Caplinger warns that for longer-term investors, the fund has a quirk–the structure of the gas futures markets has produced much larger losses than the drop in spot gas prices would suggest. This ETF is only a good bull play if you expect a quick turnaround for natural gas.
- PowerShares Financial Preferred (NYSEArca: PGF) Conservative investors are keen on preferred shares right now, due to their higher dividends and share price stability. Most preferred shares are from the financial sector, so this is a good indicator of the health of the banking and financial institutions.
- Direxion Daily Small Cap Bear 3X(NYSEArca: TZA ) Long term investors beware–these leverages type of funds are not intended as a buy-and-hold tool. However, watching these funds can give insight into near future market moves. As a gauge of retail investor sentiment, it’s useful to watch volume on bull and bear ETFs — especially ones in less-followed markets, like this small-cap-oriented fund. [ETF Chart of the Day: Small Cap Bear Funds]
- iPath S&P 500 VIX Short Term Futures (NYSEArca: VXX) Volatility is a key factor to watch, especially in today’s market. Investing in volatility is a trendy thing to do of late, as traders seek to cash in on changing expectations of how choppy the markets will be in the near future. Again, this type of note is not intended as a buy-and hold vehicle. [VIX ETFs Sputter as S&P 500 Tries to Break Range]
Tisha Guerrero contributed to this article
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.