Investors Taking Control With ETFs

Unhappy with retirement fund losses, the stock market and the economy, and compounded by a general distrust of Wall Street bankers and brokers, investors are demanding more control over their own portfolios, and they’re getting it. Investors are leaving their brokers in droves. Investors now realize that they can take a do–it–yourself approach to investing and do better than their brokers using online trading accounts with low minimum investment requirements and a wide variety of securities to choose from, such as stocks, bonds, options, mutual funds and mutual fund alternatives called exchange–traded funds.

Exchange–traded funds, or ETFs, are passively indexed investment vehicles that are traded on stock exchanges. This asset class has enjoyed a fantastic increase in popularity, growing at nearly 40% per year for the past decade. ETFs are attractive due to their built–in diversification, low costs, transparency, tax efficiency and stock–like features. They trade at about the same price as the net asset value of the stocks or bonds they hold as underlying assets. So, instead of buying every stock in an index, more often than not, there’s a comparable ETF available instead.

A big problem that ETFs solve is that they allow investors to win in both bullish and bearish markets and to shift positions quickly when the market dictates. For example, say you owned several stocks in one sector that you thought had gotten too overvalued. Suppose you wanted to short the stocks to profit as the stocks in the sector fell to more reasonable levels? You would have to sell each of those stocks and then short each one to shift from a bullish to bearish stance. That would not only be costly in terms of commissions but would take time.

Instead, consider an ETF that represented the same sector. You could be long one ETF when you feel the market is bullish, and then swap it for an inverse ETF to bet on the market decline. In both cases, you’re long a security. This is quite different from being short a basket of securities, since short positions require a margin account. You may also find when you try to short a security that trading restrictions are in place that prevent it, short sales are prohibited, or the stock has limited trading volume to get a favorable price.

ETFs may come in handy if you believe, like many others, that this year’s stock market rally went too far, too fast and is still overdue for a painful pullback. Inverse ETFs provide a short–term hedging tool and a way to profit from declines. You might want to use ETFs if you are nervous about a potential correction and want to be prepared to insure your portfolio. Here are some important factors to consider:

First, consider that the financial system is still broken. Many U.S. financial institutions are effectively insolvent or troubled at best. Second, the U.S. economy was largely propped up this summer by a monster amount of government spending. This spending will need to be balanced by either borrowing, taxation or inflation. If the government chooses to raise taxes, we could experience a period of economic stagnation like the “lost decade“ Japan experienced during the 1990s. Third, the unemployment situation in America is in the worst shape since World War II, at 10.2% unemployed, with jobs lost for 22 consecutive months. A meaningful recovery can’t happen with incomes and jobs continuing to fall.

MiracleMind has been doing a lot of research in the area of exchange–traded funds in order to supply investors with the education they need to get up to speed on this hot investment class. In fact, MiracleMind has formed a joint–venture with a seasoned expert in ETF signal technology and hedge funds to provide investors with the training and education they require, while also leveraging its marketing expertise to bring a very popular trading signal subscription service to the larger market.

Look for further announcements to come.

MiracleMind & The USIIA

The FCC is currently considering whether more government control is needed to ensure competition and more affordable Internet service. Three proposals aimed at providing universal broadband access to all American households are being evaluated with plans to make formal recommendations in February of 2010.

In September we announced a partnership with the U.S. Internet Industry Association (USIIA.org) to provide interactive multimedia learning programs during 2010 as a public service to an audience of nearly 100,000 targeted consumers who are not currently Internet–enabled.

MiracleMind and the USIIA will work together over the coming months to provide education content in the most useful subject areas for the target audience, such as consumer protection and computer courses. The public service program will be distributed in a marketing campaign that leverages national media channels through Media4Equity and consumer Internet Service Providers (SIPs).

Based on our consumer surveys, we expect as many as 5% of the respondents to this campaign to contribute to MiracleMind’s revenue by purchasing our subscription. In addition, MiracleMind will benefit from advertising revenues.

The opportunity to reach a target audience of 100,000 potentially new Internet users represents a significant opportunity to increase MiracleMind brand awareness, generate revenue, and increase subscriptions. However future opportunity also lies with the vast number of consumers in rural areas for whom Internet access isn’t a matter of choice; they simply lack the infrastructure necessary to connect. This could soon change if Federal regulators are successful in presenting their case for expanding broadband Internet service.

As Internet access becomes an option for all those who want it, MiracleMind plans to participate in ongoing public services campaigns providing learning programs while increasing brand awareness, revenues, and subscriptions.