Cover Your Assets with Exchange Traded Funds.

Your assets in this case are the stocks and mutual funds owned in your retirement portfolio 401K or other equity savings programs.

An Exchange Traded Fund is similar to a mutual fund with some very positive additional features. The ETF may contain only as few stocks as 10 or as many as 500 in the S&P500 Index. During trading sessions they are updated every few seconds and the value is given based on the value of the stocks in the ETF at that moment. An investor does not have to wait to the end of the day to buy or sell. He gets the price of that time. There are hundreds of them and their numbers are growing.

The number of standard mutual funds is declining because of poor performance. Before this bear market is over it would not be a surprise to see half of the mutual funds disappear.

The ETF not only can be purchased or sold during the day, but stop-loss prices or sell objectives may be entered with the broker to protect the investors principal or to take profits. Almost every brokerage company may access these ETFs.

Commissions and or other costs are much less than regular mutual funds. As of this time commission costs as low as $7.00 to $15.00 per trade to buy or sell are available.

There are many ETFs that have companion mutual funds. Why an investor would choose a mutual fund over an ETF does not make sense. Most mutual funds have an annual hidden expense ratio of about 1.5% every year. ETFs expense ratio is from .2 to .5%.

Investors may use ETFs to protect their portfolios during market declines by using bear funds. These are ETFs that are mirror images of the major indexes. For example if the investor has a long position in the S&P500 Index in a mutual fund may buy an equal dollar amount in an ETF with the symbol SH. SH is the mirror image of the S&P Index. It goes up by and equal amount when the S&P500 goes down. Investor now has two positions that offset each other in either direction. If the market continues down there will be no loss. Of course, if it goes up he will have no gain.

There are bear ETFs for almost every major exchange index and sector.

The problem with spreading off a loss or potential loss means the investor must know when the market changes direction so he can offset either the long or bear side of the trade. As a long time friend used to say, “He now has balanced position with an unbalanced mind”. This not recommended except for experienced traders.

Using the simple 200-day moving average the investor can easily determine major market direction and Cover his Assets with ETFs.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know. Copyright 2006 All rights reserved.

Copyright 2008 Albert W. Thomas All rights reserved. Author of "IF IT DOESN'T GO UP, DON'T BUY IT!"