Day Trading ETF’s
Exchange Traded Funds have been so successful that the big financial groups are now getting interested. Deutsche Bank has opened up a range of ETFs on the DAX, and even the big mutuals are starting to try operating ETFs to provide more market exposure for themselves. This is partly because ETFs have become so popular that they’re pulling investment capital away from the traditional investment platforms. For SMSF investors, they’re gold.
ETFs deserve to be called “derivatives” in a sense few other financial products can claim. They’re based on hard equity values, to start with. They are literally derived from holdings, not variable earnings. That puts them several classes above other so-called investment vehicles, which are more like skateboards than any sort of “vehicle”. The lucky investors in the derivative junkyard skate along on nominal values until they have to come off.
ETFs have prospered because the equity and financial markets have outgrown the old investment products. They’re far more flexible than their 19th century- based competitors, and they can target investment areas far more effectively. The average mutual or unit trust tends to be a generic product, with “growth” and other characteristics used as definitions of the nature of the investment. With ETFs you can invest across whole indices and classes of equity, quickly and efficiently, and trade them much more effectively.
There’s also a “class” factor in the ETFs. These are professionally managed funds, and the value of that was shown in the big 2008 crash. Some of the high unit value ETFs took a pounding, naturally, and weren’t helped much by the fact that the sudden loss of capital in the market reduced the high capital flow they needed. The lower unit value ETFs, however, were less affected as a group, and became day trader fodder, which was an interesting phenomenon in itself, because these traders are naturally very margin conscious.
Investors haven’t needed to hear much more than that to jump ship from the markets and head to more remunerative territory. That process has both identified a market for the major leaguers and left them with a problem: How to attract ETF investors?
Deutsche Bank is probably the best example of how the heavyweights are approaching the issue. The bank has had the good sense to use its name as a selling point, and being one of the world’s top banks isn’t exactly a turnoff for investors. The only real market resistance is coming from the fact that other ETFs are good investments. This is a highly competitive market, and getting investments away from the original ETF managers like Vanguard isn’t that easy.
If you’re doing DIY superannuation, you’ll be well aware of the spectacularly uninteresting options for investment available. Equity investments which produce demonstrated reliable ROI are thin on the ground, and those doing better than cash rates are comparatively rare.