Exchange traded funds combine features that make them attractive both to short-term traders and to investors with a buy-and-hold mentality. ETFs provide access to almost every sector and asset class under the sun.
The funds are convenient, low-cost and so readily available that some industry experts think it is both an advantage and a problem at the same time.
“You start to get more into gambling and speculating when you go into smaller areas, trying to catch them at the right time,” said John Nyaradi, publisher of Wall Street Sector Selector, in a recent report. “How complicated do you want to make it? For the average guy, you want to stick with the major sectors, the major areas,” said Nyaradi, speaking at a MarketWatch Investing Insights panel called “ETF Trading: Where the Market Action Is.”
The choices for ETF selection are vast and varied, so where does an investor begin? The tradability of these funds can get the average investor in trouble if they are not educated on the fund and the possible consequences. [Are Shifting Demographics Driving ETF Growth?]