1. Your Questions About Etfs Explained
William asks…
whats the differerence between DIG and DUG ETFs. Why dont they
act in Tande?
Arent they supposed to reflect US dowjones Oil Index. But it looks like they both have an
inverse relation ship. Can someone please explain this
gotcha, nice, thank you
Steve Winston answers:
DIG is an ETF which "seeks daily investment results, before fees and expenses, which
correspond to twice the daily performance of the Dow Jones U.S. Oil & Gas index."
DUG is an ETF which "seeks daily investment results, before fees and expenses, which
correspond to twice the INVERSE of the daily performance of the Dow Jones U.S. Oil & Gas
index." (Emphasis added.)
If both investments do what the are designed to do, they will be exact opposites of each other. It
is similar to a situation where I buy a stock to establish a long position of 100 shares of the
stock and you sell 100 shares to establish a short position of 100 shares of the same stock.
Every time the stock moves up I will make money and you will lose the same amount of money.
Every time the stock moves down you will make money and I will lose the same amount of
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2. money.
David asks…
Why do so many insurance salesman call themselves finacial
planners when they are anything but?
Nothing bothers me quite like insurance salesman that call themselves "financial planners".
They would rather sell someone whole life insurance than explain to them how a Roth IRA with
ETFs works. I wonder if they are just ignorant or if they actually understand that they are
insurance salesman and they have no clue about retirement planning.
Steve Winston answers:
Because if they called themselves Insurance Salesmen, people would run a mile without
listening to them.
Actually, they really are financial advisers/planners as they can assist you in how best to invest
your money as well as working out a portfolio for you.
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3. John asks…
What are good resources to learn about portfolio construction?
I have mutual fund and index fund investments but would like to try creating my own portfolio.
What are some good resources that explain how to create a diversified portfolio and how to
rebalance and decide when to buy/sell new securities? I'd like to incorportate ETFs in the
portfolio
Steve Winston answers:
One resource that I use is "All About Asset Allocation" Richard Ferri. But if you are going to
invest in individual companies, you also need references on how to pick individual companies. A
couple of books on the subject are "The Intelligent Investor" Benjamin Graham and "Sensible
Stock Investing" David Van Knapp. The 2nd is a cook book approach to picking stocks.
Although I do not completely agree with the methodology the concept is nevertheless a good
beginning.
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4. Maria asks…
Whats a good book to understand intermediate Finance?
I have been following the credit crisis closely but does anyone know of a good book to explain
the terms and principles of finance.
Things like ETFs bonds CDS Treasury bills prefernce shares, these sort of terms?
Steve Winston answers:
I dunno.
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5. Betty asks…
What is a good book that will teach me all about investment
vehicles?
I'm in HS and want to learn ALL about hedge funds, trusts, ETFs, securities, the stock market
and much more.
What's a good book that will explain all of this to me? I would prefer simple and easy terms for a
beginner. THANKS! I'm excited.
Steve Winston answers:
Investors Chronicle, "beginners guide to investment" see http://www.shareworld.co.uk
Beginners corner
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6. James asks…
How do you make money with precious metals?
I am confused with real vs. nominal profits. For example if the price of silver doubles, but the
value of the dollar has fallen, at the very best you may have just held your own. I don't know if
it's true, but I believe that the only time you can really make some serious cash is if metals
skyrocket due to speculation while the dollar is at a normal level - that would be a real profit.
Explain the actual ways you can make money from precious metals. I am not interested in ETFs
, just physical holdings, etc.
Steve Winston answers:
You can get free information on how to make money online. For that you have visit this website.
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7. Laura asks…
Category in ETFs ?
I'm confused about ETFs product.
I now that ETF are securities certificates that state legal right of ownership over part of a basket
of individual stock certificates.
I'm getting confused when it says about the categories like
LARGE BLEND,MID-CAP BLEND,SMALL BLEND
LARGE VALUE, SMALL VALUE
BEAR MARKET
LARGE GROWTH
LONG GOVERMENT, ETC...
Could u explain what they are?
And how to trace the news of this product ?
Thanks a lot
Steve Winston answers:
These are classifications given to different ETFs, since like you said ETF's are basicly a basket
of differerent stocks. These classifications correlate to which type of stocks are included.
For example-
Large cap companies are the big kahunas of the financial world (Market Cap of $10B+)
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8. Mid Cap are companies with a market capitalization between $2 and $10 billion.
Small Cap are generally companies with a market capitalization of between $300 million and $2
billion.
The blends would be a combination of different capitalization values basicly. And Bear ETF's
would be considered ETF's that short-sell companies, betting on the company to decrease and
making profits that way.
The problem with Bear ETF's is that the market usually is always going up. History has shown
the market has never dropped without a recovery...
Right now there are not much actual sources of news for ETF's because they cover many
companies, you would have to check the companies individually, well the top holdings to get a
clear view of whats going on.
But also most ETF"s have a website you can visit to track.
Mark asks…
Whats a good book on intermediate finance?
have been following the credit crisis closely but does anyone know of a good book to explain
the terms and principles of finance.
Things like ETFs bonds CDS Treasury bills prefernce shares inflation swaps, these sort of
terms?
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9. Steve Winston answers:
I dunno
Paul asks…
Can someone explain to me about the Stock Market?
I wanted to begin investing in stocks so people told me to read books about it but there is too
much jargon in there and i cant seem to find the answers. Maybe you can answer these for me:
What do the highs and lows on a stock graph represent? What is NASDAQ and S&P 500? What
is a common stock, a mutual fund, a bond, ETFs? What was the bull and bear market? And
please could tell me other basic knowledge i need to know before entering these books about
stocks? Thank You!
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10. Steve Winston answers:
You seem to be overcomplicating things by throwing in a lot of random things. A stock graph is
nothing more than a time based record of share prices. As the daily share price goes up and
down so it is recorded by a moving line. Instead of finding a day when the share price hit a high
you just look at the chart and there it is in front of your eyes! Just like plotting the daily
temperature or rainfall. NASDAQ and S&P are just two of many different indices. Their figures
represent different baskets of shares. The S&P is an index of the top 500 US companies, that's
all.Bull and bear, bullish is optimistic, bearish is pessimistic. But as I say you will learn all these
terms as you go along. A good book will tell you how the market actually works. Buying and
sellings shares, the market and how the prices are established. Settlement system. Dividends.
Portfolio management. Risk. Then Bonds, maybe derivatives (options). Government stocks.
Also read an investmnet magazine occassionally and the financial press. You will be surprised
how much useful knowledge you will gain from Wall Street Journal (for me Financial Times!).
Join an investment forum. If you don't understand ask questions until you do! As I say the
basics are simple. The rest you will always be learning! So don't get hung up on the trivia and
the jargon.
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