The Best ETF For 2010
The Dynamic Wealth Report
December 22, 2009
by Corey Williams, Editor
Happy Holidays! As ’09 draws to a close, it’s time for many investors to
retool their holdings for the New Year.
Whether its tax loss harvesting or evaluating what worked this year…
Well, let’s just say there’s plenty to do. I’ve spent a good deal of time
looking at my own portfolios. I found one ETF I think every investor
should consider adding to their holdings… but first, a quick look at
what’s in store for the markets in 2010.
-------------Sponsor-------------
Where Can You Turn $300 Into $1.3 Million Right Now?
Our own small-company specialist, Robert Morris, has found a
way to 'sniff out' tiny penny stocks on the verge of a major breakout. And
the timing for this has never been better.
You see, the system takes advantage of an obscure SEC regulation that
sends penny stock prices through the roof.
We've seen some stocks gain 852%... 5,450%... even 17,496% in no time
flat.
Click here
for the details...
-----------------------------------
First off, we’re not going to see +60% gains in the S&P 500 like we have
from the March bottom this year. And I wouldn’t be surprised if the S&P
500 comes up short of the +20% gains it’s posted for the entire year.
Believe it or not, any way you slice it, ‘09’s been a good year for
stocks overall.
The impressive market gains have sent the majority of stocks up. That
means by simply owning a broad based ETF like SPDR S&P 500 ETF (SPY), you
were able to capture some nice profits. And that’s a good thing. Many
long term investors and retirement funds are tied to US large cap
stocks.
The key to the market in 2009 was being brave enough to keep your money
in the stock market when our economy was being ripped apart by the
credit crisis. It wasn’t an easy thing to do!
2010 will be different. It boils down to the markets returning to a more
‘normal’ environment. And by that I mean stocks are going up or down
based on fundamental data, not hope.
Solid stocks with growing revenue and earnings will go up. And stocks
with declining revenues and earnings will go down.
So don’t be surprised to see smaller overall market returns and
fundamental data driving individual stock prices higher or lower in
2010.
With that in mind, I think one hedge fund strategy should outperform the
broad based ETFs like SPY.
It’s the 130/30 strategy.
A 130/30 strategy takes advantage of both negative and positive
expectations for stocks. And as fundamental data drives individual
stocks higher or lower, this strategy should do well.
This strategy uses shorting and leverage. That’s why it has the
potential to outperform the markets. Let me explain.
Here’s how these funds do it.
The first step to putting a 130/30 strategy in place is to buy an index
of stocks like the S&P 500. This is similar to buying an ETF like SPY.
Then, fund managers short 30% of the stocks with the lowest expectations. In other words, stocks you expect to fall because of their fundamental
data.
By selling stocks short, additional funds are created. The final step is
to take the additional funds from shorting stocks and invest it in the
best stocks of the group. Essentially doubling down on stocks they
expect to perform the best.
This strategy has been used for years by intuitional investors and hedge
funds. And they’ve often made money hand over fist! It’s designed to
outperform a long only portfolio and with the same amount of risk!
You might be thinking that’s great but it sounds like a lot of work to set
up properly. You’re right… or at least you were until earlier this year. You see, ProShares launched an ETF that follows a 130/30 strategy in July
of ’09.
It’s the ProShares Credit Suisse 130/30 ETF (CSM). By adding CSM to your
portfolio, you now have access to a tool long reserved for a select few! And it just takes a few clicks of your mouse to buy it!
In five short months since CSM launched, it’s up 14.5%. Over the same
period, SPY is up 12.7%. The 130/30 strategy is outpacing a long only
strategy by 1.8%.
Now there is a down side. If the fund manager picks the wrong stocks to
short or double down on, the strategy could underperform a long only
strategy. But so far their system of selecting stocks has led CSM to
outperform SPY.
The 130/30 strategy is incredible. You can squeeze higher returns out of
your investments without increasing risk. Sounds like a win-win
situation to me.
The IPO market was busy last week with two new companies issuing shares.
Crimson Exploration (CXPO) raised $100 million on an
offering priced at $5 per share. They’re using the funds to repay debt
from an existing line of credit.
Print
Page
Bookmark Us
Home | Whitelist Us |
Terms of Use |
Privacy Policy |
Contact Us | Security |
Site Map