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ETF Strategy: Use of Inverse ETFs

When it is appropriate to use inverse ETFs and how do they work? Inverse ETFs are positioned to go up when the market goes down. There are more than 100 options for inverse Exchange Traded Funds, and varying levels of risk involved in using them for investment. They are based on an index like the S&P 500, and can give investors a way to amplify movement in the markets.

There are non-leveraged, double-leveraged and triple-leveraged inverse ETFs through the use of futures and options. These vehicles are very volatile and for most people reading this blog they are not appropriate for portfolios. There’s simply too much risk and should be used for very short-term trades. The market has a tendency to go down and then reverse quickly, and those abrupt movements can wreak havoc on an inverse ETF portfolio. People tend to invest in inverse ETFs when emotional or scared, and that is never a good time to invest.

For most people, these are not a good investment vehicle, and not the kind of strategy that we think most investors can implement with consistent success. They are simply too volatile and too short-term for most investors to use well – however there may be times in the future when we think inverse ETFs are a good option for short-term gains, so stay tuned to our blog and podcast if you’re interested in that course of action.

As always, please email any further questions to askdoug(at)dougfabian(dot)com or call our offices at 800-391-1118 for more information and personalized advice.

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Market Volatility and Risk

When we blog and podcast the news and views in the financial markets, our goal is education, information and motivation (not, of course, personal financial advice). We want to help you stay informed and aware of what’s going on out there and how you can protect your investments and meet your financial goals. If anything we talk about on the podcast or blog piques your interest, please don’t hesitate to call our offices at 800-391-1118 for a complimentary consultation and portfolio review.

There’s a lot of market volatility out there right now, and we know you’re aware of that. The domestic economy (particularly retail sales), Europe’s horrible economic data and down stocks, the scare of Ebola (which has hit airlines and tourism particularly badly), interest rates falling rapidly, and the collapse of oil prices have all lead to some uncertain territory for investors. Remember that we live in a global economy, and that there is concern out there about global growth.

Many people have asked us if it’s time to sell right now. We do not think that you need to sell everything, but you do need to look at your risk exposure at this time. It’s important to know what your goals are and how the current market action affects those goals. Doug does not believe that the market is done correcting at this point, and we think all investors should take careful inventory of what they own and why at this point. If you have any questions about risk or what you should do in your specific portfolio, please email askdoug(at)dougfabian(dot)com and we’ll do our best to answer those questions directly or address them on the podcast.

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October ETF Snapshot: The Top 20 ETFs by AUM

As of September 30, the top 20 ETFs as measured by assets under management (AUM) account for almost 40% of all assets invested in exchange-traded funds. Be sure to check out Doug Fabian’s Special Report for October, which details this information here. Here are a couple of his thoughts about the data in October’s ETF Snapshot:

  • The top 20 ETFs are dominated by US Equity indexed products. This shows a lack of diversification outside of the U.S. by investors.
  • Cost seems to be playing a major factor in ETF selection. The cost per year to own 17 of the 20 ETFs is 20 basis points or less.
  • While iShares remains the largest provider of ETFs, Vanguard has steadily amassed assets.  Leveraging their background in mutual funds, Vanguard is vying to become the index champion with their wide variety of low-cost ETF offerings.
  • ETFs are no longer just a hedge fund or day-trading tool, but rather sound long-term investment products for any and all investors.

For the complete special report, click here. Also, don’t forget that today, Friday, Doug records a new Weekly ETF Report podcast. If you’d like to listen or subscribe to that broadcast, click here.

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The 5 Investments You Might Have

Many people have gotten very complacent about a stock market crash or downturn, and this is a good opportunity to take a look at your portfolio and what positions you own and your allocations to those positions.

Look at your big positions, and make sure that those large positions are well-thought-out and carefully examined. There are five kinds of investments you might own in your portfolio, which are:

  • Individual stocks
  • Bonds
  • Mutual funds
  • Cash
  • ETFs

So far, bonds have been a safe haven for investors. This year, the U.S. markets have been pretty resilient, but we are starting to see some corrections and trend-breaking. There is a lot of news out there – sanctions against Russia and slowing of global growth, interest rates and gas prices staying low, and a strong dollar – all of which potentially matter to your portfolio.

We believe that there’s opportunity coming for smart investors and we want to help you be prepared. If you want a one-on-one consultation with Doug and his team of advisors, please call our offices at 800-391-1118 for a personalized consultation about your specific investing goals and portfolio needs. You can also email questions to askdoug(at)dougfabian(dot)com.

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A Defensive Portfolio Posture

Announcement: this November, we will have a special post-election teleconference for podcast listeners only! This is a very important election for our money: taxes, entitlement spending, the financial markets, and the economy will all be impacted by how the country votes this November. Make sure to sign up on our podcast page to receive the details on this special teleconference as we get closer to election season.

As you know, here at Fabian Wealth Strategies, we believe that risk management is a key strategy for successful investing. In fact, one of the reasons that Doug believes so strongly in using Exchange Traded Funds is their liquidity. ETFs are more liquid than mutual funds and are easier to sell than many other investment vehicles out there.

Speaking of selling, we believe that right now is a good time for investors to raise some cash for upcoming opportunities. We are not offering personal investment advice in our blog or podcast, and we know that every investing situation and portfolio is unique – so how much cash you need and how you reduce your exposure to U.S. equity markets is up to you, but we would advise you to look at your portfolio and consider your risk and exposure. It seems that risk is rising in the markets right now, so we think that raising cash is wise. Also, in the month of October, there are usually some good buying opportunities and the beginnings of a potential new uptrend, so that is what our team is on the lookout for.

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Video: Chris Versace on Retail Spending

Will lower gas prices will boost holiday spending? FBN’s Liz MacDonald and Fabian Wealth Strategies’ Thematic Growth Portfolio manager Chris Versace discuss their outlook for holiday retail sales.

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Video Update: U.S. Equity Markets (Charts)

In this week’s video, Doug shows you data and charts showing current market action, and teaches you how to watch the markets by following ETFs. Doug also shows data on long-term interest rates and treasury bond trends, as well as discussing oil and energy prices in the U.S., and the top ETFs available for investors.

Watch the video to see the charts and detailed information here.

 

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Doug’s View of the Emerging Markets Right Now

Download the complete list of Exchange Traded Funds here! We have made the format easier to digest and understand, and we think it’s a great resource for you as you consider investing with ETFs.

Here are the reasons Doug likes investing in the emerging markets right now:

  • Price point: stocks in the emerging markets are less expensive than much of the world
  • Demographics: more young people and fewer retirees
  • Middle-class movement: more workers moving economically upward
  • Economic growth and more discretionary income for emerging market workers
  • Short-term downtrend, which should turn into good new buying opportunities
  • Good growth opportunity for your portfolio

If you have questions about the emerging markets and how they might fit into your portfolio, please call our offices at 800-391-1118 or email askdoug(at)dougfabian(dot)com.

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Doug Fabian’s new podcast now available on iTunes!

We wanted to let you know about the exciting launch of Doug’s new podcast, “Doug Fabian’s ETF Strategies,” which is available now on iTunes.

Each Friday, Doug will review all of the latest market action during the week, including all of the financial news you care about. You’ll also learn all about the latest and greatest innovations in the world of exchange-traded funds (ETFs).

The newest feature of the podcast is an in-depth discussion of a new ETF strategy each week. By using iTunes, it’s now easier than ever before to listen to the podcast on your smartphone or via your computer through the iTunes software. In fact, we encourage you to go to iTunes and sign up for Doug’s latest podcast right now. Doing so will allow you to get the latest updates as soon as they become available, and you’ll always have each episode ready for a listen at your convenience.

Click here to subscribe to Doug Fabian’s ETF Strategies on iTunes,

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New Podcast: “Doug Fabian’s ETF Strategies” Begins TODAY!

TODAY, we are switching to our Friday broadcast: Doug Fabian’s ETF Strategies! This is big news for us as we are spreading out our influence by putting our podcast on iTunes, in order to make this show more accessible and even better.

Doug has been broadcasting weekly for 14 years, and he has not intention of changing that now – we’re just changing the date and improving our reach and content in order to serve you better. So tune in every Friday for our new radio broadcast and don’t forget to subscribe on iTunes here!

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