Risky Market? Consider Exchange Traded Funds Instead Of Stocks

March 30, 2008 8:38 AM

As many investors in Bear Stearns would probably now attest, a little risk avoidance is probably a good thing right now with the uncertaintly surrounding the financial sector. One way to eliminate ” company collapse” risk is to invest/trade in ETF’s as opposed to specific stocks. In the “old days” there were only 4 (QQQ, SPY, DIA and SMH), but now there are more than you could possibly read about. They have them for very specific sectors like financials (XLF), retail (XRT), etc.

There are three basic types of ETF’s - Index, mathematical model based, and leveraged. QQQQ is an example of an index based ETF and should mimic the Nasdaq top 100 index. PowerShares use their own mathematical model and are not simply the underlying index. Lastly, ProShares Ullta ETF’s are highly leveraged and will move significantly more - in both directions - than the index. The leveraged ETF’s are generally a factor of 2 to 1. So make sure you undestand each before investing in them.

Here is a list of PowerShares ETF’s and you can also find the link on our home page.

PowerShares http://www.powershares.com/products/tickers.aspx

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