New Exchange Traded Fund Makes Sophisticated Investment Strategies Available To ETF Investors
Keywords: Exchange Traded Funds, Currency Trading, Powershares
The world of Exchange Traded Funds has been expanding choices to investors at an astounding rate. After dissecting stock sectors every which way, new funds were established that moved into the areas of commodities by allowing investors to invest in oil, metals and currencies.
Now the choices are becoming even more sophisticated. A new fund (Powershares DB G10 Currency Harvest Fund) has been created that aims to profit when the currencies of countries with higher interest rates outperform those with lower interest rates. This is known as the currency carry trade. This index is comprised of the group of 10 currencies which are: U.S. dollar; euro; Japanese Yen; Canadian dollar; Swiss franc; British pound; Australian dollar; New Zealand dollar; Norwegian krone, and Swiss krona.
The strategy here is that the index is designed to exploit the trend that currencies associated with relatively high interest rates tend to rise in value relative to currencies associated with low interest rates. This sophisticated index reflects long futures positions in three currencies with the highest interest rates, and short positions with the three currencies with the lowest interest rates. If one of three highest interest rate or three lowest interest rate currencies is the US dollar, the fund will not take a position.
Collateral for the currencies is provided by short-term treasury bills. This fixed income part of the portfolio provides yield which is used to offset the ETF fees.
Investors are looking for new asset classes to invest in. Currencies have a low correlation to stocks and bonds. The stock and bond markets have been recently been flat areas for investment money. The currency markets provide an asset class for investors to put their money. This is especially taking on significance now since the real estate market which has been attracting investment money, is now slowing down, especially in the residential sector.
This fund is much different from the single currency Exchange Traded funds such as the Euro Currency (FXE) fund that is managed by Rydex. This fund buys euros rather then currency futures. Rydex also manages currency funds tied to the British pound and the Mexican peso.
Unlike other currency related Exchange Traded Funds, the G10 Harvest fund is moving into the area of hedge funds with its sophisticated strategies. It is not just betting on the up down movements of a particular currency, but a rate spread strategy.
This leveraged long/short strategy has been used recently to take advantage of rock bottom interest rates in countries such as Japan and Switzerland. There is a risk, and that is that the US dollar will lose value against the Yen. Hedge funds and speculators have been making money on this trade. Now it appears they are starting to unwind their positions. There is some speculation that the carry trade has artificially propped up currencies that have higher interest rates.
For small investors, this fund gives them entrance to a strategy that only the larger players had access to. Even though this trade has been historically profitable, there is always a risk. Investors should understand the trade and the risks involved. This type of investment is not for everyone, however there are a number of small investors that may be attracted to it.
Traders should understand that this fund is highly speculative. It is intended as more of a long term investment and should not be used for frequent trading due to potential negative tax consequences. Traders could be lured into potentially damaging and costly trading. For US investors, this tool could be used for a long term diversification tool. With the political situation so volatile in the middle east and the economic consequences of interruption of energy supplies, investors must realize these markets can be very volatile which increases the risk.
Andrew Goldman is president of Metal Rabbit media services, the operator of www.exchangetradedfundinvesting.com. Andrew has contributed articles on finance and environment to severla publications over the last ten years.
Previous Articles Highlighter:
Despite Slowdown California Home Prices Set New Record (1)
The median home price for the state has hit a new high and weighed in at $478,000 in June. Home prices in the state have increased 1.9% in one month and 7.4% over one year ago.
Two New Exchange Traded Funds Allow Unique Oil Investment Strategies (2)
The thing that makes this unique is that the ETF does not invest in the futures either. "We're not buying oil, but because we issue shares in pairs we can generate returns by pledging assets between the matching funds," said Greg Drake, managing director at Claymore Securities, in an interview.
New Fund For Indian Investors Can Benefit U.S. Investors (3)
It is popular for investors to buy a certain amount of gold for long term investment. This concept of holding gold is catching on more in the United States but it is very common in India.
Exchange Traded Funds Venture Further Into Foreign Currency Markets (4)
If investing in foreign stocks it is reasonable to put some of your portfolio in Foreign Currency Exchange Traded Funds. There has been a great deal of money moving into foreign markets and these were hit pretty hard in the recent downturn.
California Foreclosure Activity Up By The Biggest Margin In 14 Years- Is The Bust Starting? (5)
The biggest drop in sales was seen in Ventura and Orange counties Price appreciation slowed to its smallest rate in six years. For the past year the rate of appreciation in southern California was 4.9%.
Using ETFs To Invest In A Good Performing Commodity Sector You May Have Missed (6)
Both of these methods are hit and miss. Utility funds are much more heavily weighted toward companies that are not involved in the water industry. The only other way to invest in this industry was to invest in individual stocks.
Best Performing Exchange Traded Funds For 2006 Thru August (7)
In the domestic markets the hotel sector is looking particularly attractive. This is due to a healthy increase in revenue per room. The lesson is to learn the markets.
California Real Estate Market Gives Mixed Messages (8)
The default rates are up, however these rates are still low. Andrew Goldman is president of Metal Rabbit media services, the operator of www.carealestateinvest.com and www.Exchangetradedfundinvesting.com. He has written a number of articles on finance and investment over the last ten years.
A New Exchange Traded Fund May Have A Major Impact On Long Term Silver Prices (9)
With the industrialization of India and China, the use silver as an industrial metal is increasing. There is now competition for physical silver for use as an industrial metal and for storing of physical silver for investment.
Another Way Of Looking At The Gold Price Meltdown (10)
It appears the hedge fund investors who bid the price up, have decided to take their profits. Gold prices plunged and many financial analysts have proclaimed that the bull market in gold is over.
New Powershare ETFs Give Exchange Traded Fund Investors New Ways To Profit In Down Markets (11)
Investors in these funds can even play it safer by using these funds as a hedge to their long positions in index or sector funds. In this way Exchange traded Fund Investors have even less at rish because if they are wrong about a market downturn, they also hold positions that will gain in market conditions are more favorable.
A Unique Precious Metals Exchange Traded Fund Is Launched Under A Cloud Of Worry (12)
The Amex Gold Miners Index, is the first exchange-traded fund in the U.S. offering investors exposure to the gold-mining equity market, as opposed to just the metal itself. This is more broad based for investors and is based on equities in the industry not commodity prices.
Home Sales Continue To Drop In Southern California (13)
Last spring it was 27 days, now it is 48. The county to watch is San Diego. It was the first county to accelerate in home value appreciation and the first to slow.
A Risky Investment Becomes Commonplace (14)
Andrew Goldman is president of Metal Rabbit media services, the operator of www.exchangetradedfundinvesting.com. He has written a number of articles on finance and investment over the last ten years.
Will Long Term Home Ownership Lead To Profits Or Declining Values? (15)
Keywords: real estate, california real estate, home sales, statistics, northern california, southern The latest report from PMI Mortgage Insurance company looks at real estate trends. The report indicated that if you owned a home from 1986 thru 2005 in 50 of the largest metropolitan areas, you did very well.
A Foreign Exchange Traded Fund Investors Should Consider (16)
There fund has moved almost straight up from the beginning of March through the first week of April. When a fund moves in this manner there is bound to be some profit taking.
One Of The Most Popular Exchange Traded Funds Will Soon Have Solid Competition (17)
Current technology funds give technology companies weight in the index based on market capitalization. Companies with large market capitalizations such as Microsoft would have a larger influence on the index.
What Do You Need To Know About Car Loans? (18)
Especially since you're entitled to get it free annually. It can pay to know what the dealership has to offer, of course. No doubt you have seen plenty of commercials offering low rates for top tier customers.
Factors That Influence Car Insurance Cost (19)
With the cost of everything rising steadily, it makes sense to do whatever you can to save money on necessary expenditures, such as car insurance. There are many factors that can influence the rise and fall of an individual's auto insurance cost.
Mortgage Lending-A Few Facts To Start Down The Path To Home Ownership (20)
None of us will totally comprehend the inner workings of a mortgage lender but plain and simple is the fact that mortgage loans are accessible for all types of homebuyers with all types of credit.
Newer Articles Highlighter:
MyOwn10-Key - How To Balance Your Checking Account Without First Entering All Of Your Transactions (1)
You know that all transactions above this line are in balance. If there is a problem with balancing the next statement, you will only have to concern yourself with checking for errors in entries following the last underlined balance.
Credit Card Types: Unsecured (2)
Balance Transfer: Your unsecured credit card may offer what is known as a balance transfer. A balance transfer is when you have an existing balance with another company and you transfer that balance over to the new card.
The Benefits Of Gathering Relocation Information (3)
If you need to relocate quickly, the Internet can be very helpful. The Internet can help you find a home or apartment, give you a general idea of what the area is like, provide contact information for schools, realtors, leasing offices, and other relocation specialists, allow you to rent moving trucks or vans, research basic information about electric companies, cable companies, DMV, vehicle registration requirements, tax information, restrictions, and many more things.
Cashback Credit Card For Reward-Loving Individuals (4)
In this variation of cashback credit card, you will be able to earn 1 percent back for every purchase that you will make. Aside from earning rebates, you are also entitled to extended warranties, unlimited protection for purchases, and personal accident insurance for the cardholder.
Holiday Insurance - A Necessity Or A Luxury? You Decide (5)
What If You Have To Cancel? Trip Cancellation Insurance covers the traveler in the event that a holiday has to be cancelled because of sickness, a death in the family or other dire circumstance.
How To Get Real Estate Listings Via Real Estate Marketing Articles (6)
Arguably, the best way is to find a marketing strategy that you like and stick to it. But, if that doesn't clear up the matter you might consider using real estate marketing articles.
Introduction To Stocks (7)
Carefully research the companies you are going to invest in and you will do fine. Jim Pretin is the owner of www.forms4free.com, a service that helps programmers make email forms.
Understanding A Balance Sheet (8)
You can calculate the shareholder equity by subtracting total liabilities from the total assets. If Shareholder Equity is a very small number or a negative number, this does not bode well for investors.
Penny Stocks: A Good Investment (9)
To find the right company, there are a few things you need to look for. Number one, you need to do some research and try to find out how many shares the company has in its float.
Understanding Auto Insurance (10)
Keywords: auto insurance You are required by law to carry auto insurance in the state where your vehicles are registered (it is required in almost all 50 states). Everyone has it, but hardly anyone understands the provisions or coverages outlined in their policy.
Common Investment Scams (11)
Use your common sense when deciding whether or not you want to invest in a relatively unknown company. Do some research before you invest in and you should do fine.
P/E Or PEG, Which Is Better? (12)
If it is low, this could be an indication that the earnings of the company are expected to plummet, causing investors to run away from the stock, resulting in a low share price.
Tax Consequences Of Municipal Bonds (13)
I hope this information will help you to evaluate the tax consequences associated with municipal bonds. Ask your broker about each of the situations outlined in this article before you invest.
Introduction To Mutual Funds (14)
Carefully examine the fee structure and investment strategy before investing and you should do fine. Jim Pretin is the owner of www.forms4free.com, a service that helps programmers make email forms.
Introduction To Day Trading (15)
Such a trader literally will buy a stock and then sell it within a few minutes, or sometimes within 30 seconds or less. Others look for changes in momentum and will hop in at the beginning of an upswing and then ride it out until the upswing is over.
What Mergers Mean For Your Investments (16)
Other times, one company in the transaction is significantly larger than the other, and it buys the stock of the other company and absorbs all of its assets and businesses by issuing stock from the larger company to shareholders of the smaller company.
Understanding Your Insurance Policy (17)
The purpose of your insurance is to protect you from damages suffered to your home, car, or health, etc. In addition, your policy should contain a clause regarding legal capacity.
Is Your Stockbroker A Crook? (18)
Use all of the recommendations outlined in this article when evaluating your financial professional and you should do fine. Jim Pretin is the owner of www.forms4free.com, a service that helps programmers make HTML forms.
Introduction To The Forex Market (19)
However, do not gamble your nest egg on currency trading because inexperienced traders can lose everything they have rather quickly in spite of the relative safety of the Forex market.
Stock Market Basics (20)
Stocks trade on an exchange. The largest exchanges where the premier stocks trade are the New York Stock Exchange, American Stock Exchange, and the NASDAQ. Within an exchange, there is the primary and secondary market.