Page 100 - Ready Set Retire

Stephen J. Kelley

mutual funds, ETFs are priced based on what the buyer and
seller agree to.

That means ETFs can be bought and sold throughout the
trading day. In addition, they can be sold short, use limit
orders, options, or the other means available to the exchanges.
Hence the term, “Exchange-Traded Funds.”

Why is this important? Because mutual funds are typically
bought and held for longer periods of time. ETFs, on the other
hand, are treated as securities in and of themselves. However,
they, like mutual funds, may can reduce the higher risk often
associated with single stocks.

ETFs are also a great fit for tactical investing. Instead of buying
and riding out the ups and downs in a bunch of funds, tactical
investing is using the market conditions to maximize gains and
minimize losses. ETFs can mimic virtually any asset class or
sector. So, you might have ETFs composed of small growth,
or midcap value. Or it could be high tech, or healthcare, or
finance, or auto, or agriculture, or any other sector.

Once you have figured out what you want to follow, formulas
are created and as buy and sell signals develop, trades are made.
Examples of tactical styles are hedging, tilting, rotating,
momentum and whiplash. Managers may use one, or all, or
many other styles.

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