Latest news, trends and ideas for investing with exchange traded funds | ETF Commentary

Eleanor Laise and Jason Zweig sum up the new rules for ETF investors after reflecting on the May 6 flash crash which saw some exchange traded funds temporarily trade close to zero.

The advice is mostly common sense – know your risk tolerance, don’t use stop loss orders and check the bid-ask spread.

However, several of the rules conclude with “consider mutual funds”.  Unfortunately, that’s just bad advice.  Mutual funds are costly, mysterious and, overall, not investor friendly.

Just one example, there is no bid-ask spread for a mutual fund because the manager sets the price at which you buy or sell.  You have no say in the matter.

Some of the ETFs that had trades cancelled as a result of the May 6 flash crash include:

Vanguard Total Stock Market (VTI)

iShares Russell 1000 Growth Index (IWF)

iShares Russell 1000 Value Index (IWD)

iShares Russell Midcap Index (IWP)

iShares S&P 500 Growth Index (IVW)

iShares Russell 2000 Value Index (IWN)

Vanguard Small Cap (VB)

Vanguard Growth (VUG)

iShares S&P 500 Value Index (IVE)

Vanguard Value (VTV)

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Is active investing skill or just more risk taking?  That’s the question New York money manager Gregg Fisher asks in the Forbes article How to Profit When Efficient Markets Are Driven By Inefficient People.

Fisher takes a look at momentum investing as a key investment factor and suggests that most investors could benefit from tilting a portion of their portfolio to this approach.  The benchmarks used in Fisher’s study include the Russell 2000 Growth Index (IWO) for small cap and the Russell 1000 Growth Index (IWF) for large cap.

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