ETFs Available To Trade Free Now

Schwab US Broad Market ETF (SCHB)
Schwab US Large-Cap ETF (SCHX)
Schwab US Small-Cap ETF (SCHA)
Schwab International Equity ETF (SCHF)

Available In December

Schwab US Large-Cap Growth ETF (SCHG)
Schwab US Large-Cap Value ETF (SCHV)
Schwab International Small Cap ETF (SCHC)
Schwab Emerging Markets Equity ETF (SCHE)

Are Charles Schwab’s ETFs Right For You?

If you are a investor looking for longer-term investments or trades and like using indexes; then these ETFs are worth looking at. For traders and shorter-term investors, the volume is too low for me to recommend them. When trading stocks and ETFs (other than the Schwab ETFs listed above), commissions rates are $8.95 – $19.95, depending on the amount of trades placed.

Understand that commission free trading is nice, but with Charles Schwab, you are limited to a few ETFs that you can trade. If the volume rises in these ETFs, it might be worth looking into. For now, the products are too limited and commissions on other ETFs and stocks are higher than most online brokers.

Get more information on opening an account and Charles Schwab ETFs @ www.schwab.com.

JNK vs SPY

SPDR Capital High Yield Bond Portfolio ETF (JNK) gets it ticker from the bonds the ETF holds which are less than investment grade. Since they are less than investment grade, many refer to them as “junk bonds”. When compared to a two-year chart with the S&P 500, SPDR Capital High Yield Bond Portfolio ETF (JNK) outperformed the S&P 500 SPDR ETF (SPY). Not only did JNK significantly outperform but it also returned a monthly dividend currently yielding around 14%.

Other High Yield Bond ETFs

iShares iBoxx High Yield Corporate Bond ETF (HYG) and PowerShares High Yield Corporate Bong ETF (PHB) are two more ways to play high yield bonds as they track different indexes and currently yield 10.5% and 11.26%, respectively.

DISCLAIMER: I do own shares of JNK.

Brazil

Brazil is my least favorite of the BRICs but still offers a chance to make money. The ETF that I use for trading Brazil is iShares Brazil Index ETF (EWZ). EWZ is a trade rather than an investment because of its exposure to oil and currency. Some may like EWZ for an investment; I would rather play individual stocks for investing in Brazil.

Russia

If commodities are not in play, watch out for Russia. Although, Russia offers opportunity, it is highly exposed to oil. If the rapid growth 0f China and India continues, they will need oil to fuel their growth. Market Vectors Russia ETF (RSX) will get you in the Russian trade.

India

India is right there with China in terms of growth. Not many economies are still producing a positive GDP (gross domestic product), India along with China are. If you already have a position in China, start building a position in India using the WisdomTree Earnings Weighted India ETF (EPI).

China ETF

China is my favorite of the BRICs as China has the highest growth rate and expectations. China, with the largest population in the world, a growing middle class, and manufacturing that the world depends on, offers a great investment opportunity. Investors that want exposure to China can do so through iShares China 25 ETF (FXI). This ETF invests in the top 25 largest and liquid Chinese companies.

Exposure To All BRICs Through One ETF

If you are looking for one ETF to get exposure to all the BRICs, try Claymore BRIC ETF (EEB).

BRICs Are Great For Trades And Investments

These ETFs make for great investments and trades but please understand the risk associated with each. The ETFs listed are not the only ETFs to get exposure to the BRICs but are ETFs with good volume levels, making it easier to get in and out.

What is the VIX?

The VIX is an index that tracks market volatility of the S&P 500. The VIX, also known as the “fear index,” shows whether there is more optimism or pessimism in the S&P 500. The higher the VIX the more pessimism or “fear” is in the S&P 500. The VIX indicates how many people are buying put options. The higher the VIX is the more people are buying puts. There are two main reasons to buy puts, one is to protect open positions and the other is to speculate on a downward move.

Two ETNs To Trade Market Volatility

• Short-Term Volatility
  iPath S&P 500 VIX Short-Term Futures ETN (VXX) which buys rolling long positions in the VIX futures in the first and second month. Looking at the chart below, you can see the negative correlation to the S&P 500.
  
• Mid-Term Volatility
  iPath S&P 500 VIX Mid-Term Futures ETN (VXZ) also buys rolling long positions in the VIX futures but instead only has positions in the fourth, fifth, sixth, and seventh month.

Market Volatility Is A Trade Not An Investment

If you buy one of these ETNs, do so to hedge long positions or short the market, not an investment for the long term. Use these ETNs as trades only.

Buy Gold

One of the safest and most popular ways to trade or protect your portfolio from inflation is investing in or trading gold. The easiest way to invest or trade gold is through the SPDR Gold Trust ETF (GLD). Looking at the chart below you can see the GLD has performed well gaining 60% over the last three years when compared to the dollar at which lost 6%. If you are looking for another way to trade gold, try looking at the Market Vectors Gold Miners ETF (GDX). Gold miners significantly increase their profits when inflation picks up; as gold moves up, mining companies profit margins expand.

Treasury Inflation-Protected Securities

Treasury Inflation Protected Securities are another way to trade inflation. ETFs like iShares Treasury Inflation-Protected Securities ETF (TIP) give you a real rate of return, do not expect to make a significant amount of money here but rather reserve the value of what you have. What happens when global inflation occurs? Try looking at global ETFs like SPDR DB International Government Inflation-Protected Bond ETF (WIP) track global inflation. Looking at the chart below again you can see TIP outperformed the dollar returning 16% while the dollar lost 6%.

Buy Commodities ETFs

Commodities are a great way to trade inflation. Commodities tend to move more rapidly than the other two ways mentioned above. Commodities ETFs like PowerShares DB Commodities Index ETF (DBC) have big price swings and should be traded and watched carefully. Buying into commodities at the wrong time can devastate a portfolio but when used right they can produce huge gains. You might want to buy the individual commodities like crude oil along with a gold ETF previously mentioned.

Whatever ETF or tracks you choose to use, do your research before getting into them. Make sure you have a good case for an increase in inflation. These ETFs will not do much good to you in a deflationary period.

Why Commodities?

When uncertainty comes into the stock markets, many investors/traders turn to commodities like gold, oil, or other commodities that are likely to rise. Why trade commodities? In an uncertain market, people still use commodities, some more than others. When there is a threat of inflation or the dollar starts loosing its value, watch the price of gold, which is almost certain to go up.

Be forewarned, commodities can move VERY FAST both to the up side and down. Some of investments below are leveraged products that can significantly increase your profits but at the same time, they can increase your losses too. I always like to recommend stop orders. With leveraged positions, it should not be optional to place stop orders. PLACE THEM!!!

Commodity ETFs

Want an ETF that gives you a diversified portfolio of commodities? iShares S&P GSCI Commodity Indexed Trust (GSG) is composed of 67% energy, 16% agriculture, 7% industrial metals, 7% livestock, and 3% precious metals. A less diversified way to play commodities through ETFs is the PowerShares Commodities Index (DBC) which investing corn, gold, heating oil, aluminum, wheat, and crude oil.

You can also invest in individual commodities.

• Natural Gas and Oil
• Gold

Leveraged Commodities
ProShares offers the following leveraged (2X) long ETFs:

• Ultra Long Commodities (UCD)
• Ultra Long Crude (UCO)
• Ultra Long Gold (UGL)
• Ultra Long Silver (AGQ)

ProShares also offers the following leveraged (2X) short ETFs:

• Ultra Short Commodities (CMD)
• Ultra Short Crude (SCO)
• Ultra Short Gold (GLL)
• Ultra Short Silver (ZSL)

Whether you are looking to trade commodities for the short term or as a permanent part of your portfolio commodities ETFs are great investments that can offer great returns. When using the leveraged ETFs, place stops and trade them; they are not investments.

High yield bonds, MLPs, and REITs are a great way to increase your portfolio’s dividend income. Most of these investments had very little price action until the current recession started. When the economy starts to recover, these investments will move with the market and feed you a nice monthly dividend. The following investments are worth a look if you are building an income portfolio.

High Yield Bonds

iShares Corporate High Yield Bond ETF (HYG) that offers an 11.56% yield gives investors a diversified high yield corporate bond portfolio through one ETF. Another way to invest in high yielding corporate bonds is through the SPDR Barclays Capital High Yield Bond Funds (JNK), which yields 14.86%. Note these high yielding bonds carry more risk than the investment grade bond ETFs such as iShares Investment Grade Corporate Bond ETD (LQD) yielding only 5.96%.

Oil/Natural Gas Trusts

Pengrowth Energy Trust (PGH) is Master Limited Partnership (MLP) based in Canada, which explores and develops oil and natural gas operations. If you are looking for high yield exposure to oil but with a diversification of natural gas, try PGH, which yields 12.6%

Penn West Energy Trust (PWE) is another Canadian based oil and natural gas trust that yields 11.2%.

MLPs have a different tax structure; one that taxes dividends as ordinary income. With Canadian Trusts, you will pay a foreign tax on the dividends before you receive the dividend. This foreign tax is deductable from your end of year taxes.

Real Estate Investment Trusts (REITs)

Most individual investors do not have, or access to, the funds required to purchase real estate but through REITs small investors have a wide variety of real estate from which they can choose to invest in. I have listed three REITs below that you might want to look into.

Entertainment Properties Trusts (EPR), currently yielding 12.5%, is the largest Real Estate Investment Trust. EPR holds a variety of entertainment properties from movies theaters, which makes up about 50% of its holdings, to retail centers and land leased out to restaurants.

Health Care Property Trusts (HCN), currently yielding 8.5%, invests in real estate used for medical purposes ranging from senior housing to medical office buildings.

Vanguard REIT ETF (VNQ), which currently yields 12.26%, is an exchange traded fund, or ETF, that diversifies its holdings through various REITs. If you want to invest in REITs but want one diversified holding, this would be the ETF for you.

Bond ETFs and MLPs usually pay a monthly dividend, which makes them attractive to income investors. Please research the risks associated with each investment before investing. The companies listed above are just a few within their respective market.

Note: Tax rates on some of the above investments are that of ordinary income. With the recent rally, I would expect most of these investments to come down in price.

Investing In/Against The US Dollar

Think the dollar is going to go up in value or inflation will bring down the value of the dollar? Trade the dollar with ETFs.
PowerShares US Dollar Index Bullish (UUP) is a way to get long the US dollar and PowerShares US Dollar Index Bearish (UDN) is a way to get short the US dollar. If you’re looking for a shorter term play on the dollar, these ETFs have an added tax benefit. They trade US Dollar Futures which are taxed at 60% long term gains and 40% short term gains, no matter how long you hold them. If you’re looking for a longer term play on currencies, try CurrencyShares.

Invest In Other Currencies

CurrencyShares, a group of 9 ETFs offered by Rydex Investments, are a great way to play global currencies with the added benefit of monthly income. These ETFs do not have the tax benefit of PowerShares US Dollar Index Bullish (UUP) and PowerShares US Dollar Index Bearish (UDN). The following ETFs have the same taxation as stocks.

Australian Dollar Trust (FXA) – Current interest rate 2.53%.
British Pound Sterling Trust (FXB) – Current interest rate 0.11%.
Canadian Dollar Trust (FXC) – Current interest rate 0%.
Euro Trust (FXE) – Current interest rate 0.99%.
Japanese Yen Trust (FXY) – Current interest rate 0%.
Mexico Peso Trust (FXM) – Current interest rate 7.25%.
Russian Ruble Trust (XRU) – Current interest rate 1.55%.
Swedish Krona Trust (FXS) – Current interest rate 0.38%.
Swiss Franc Trust (FXF) – Current interest rate 0%.

Do not purchase CurrencyShares as an income play but rather as a call on a specific currency with the added benefit monthly dividends. The interest rates change frequently, so check the CurrencyShares site for updated interest rate and product information.

There are many factors that go into a currencies pricing. Example: some currencies get stronger with the price of oil and weaker when oil drops. When investing in a currency, know what has an impact, whether positive or negative, on the currency.

Two Easy Ways To Invest In Gold

Investing in the SPDR Gold Shares (GLD), which tracks the price of gold, is the easiest way to gain exposure to gold. There are many other ETFs that track gold but I recommend GLD because of the high volume, meaning that it is easier to get in and out.

The other way to invest in gold is through the gold mining companies using the Market Vectors Gold Miners ETF (GDX). With these companies, as the demand and price of gold goes up, so do the profits of gold mining companies. Choosing the ETF over a single company gives you the diversification while you will not get the best return, you will also not get the worst. I don’t have the time to research individual companies, so ETFs work better for me.

Not A Buyer Of Gold?

Looking to short gold? Try investing in PowerShares Gold Short (DGZ) which tracks the inverse of gold. If gold goes up, this DGZ goes down. If gold goes lower, DGZ goes higher.

What To Leverage Your Gold Position?

Looking to leverage your gold position without the use of futures, options, or the use of margin? The following ETFs track double the daily performance of gold. If you want a leverage position on gold moving down pick up some PowerShares Double Short (DZZ) which goes double (2x) short gold. If your thinking gold is going to move higher, you might want to try PowerShares Double Long Gold (DGP).

Remember not to over leverage yourself. If you are using these leveraged ETFs, don’t use margin and double your risks.

Watch your moves in gold as it created a double top recently.

iShares Aggregate Bond Fund (AGG)

iShares Aggregate Bond Fund (AGG) tracks the Barclay’s Capital U.S. Aggregate Index which invests mostly in investment grade bonds. AGG currently yields 4.64%.

iShares Investment Grade Corporate Bond Fund (LQD)

Looking for a little more risk in the bond market? Try iShares Investment Grade Corporate Bond Fund (LQD) which invests in Corporate Bonds and currently yields 5.61%.

iShares TIPS Bond Fund (TIP)

iShares TIPS Bond Fund (TIP) tracks Barclays Capital U.S. TIPS Index. This ETF is invested at least 95% in Treasury Inflation Protection Securities. The ETF is also a great hedge for inflation with all the new money the government is printing. TIP currently yields 6.34%.

PowerShares Dividend Achievers (PFM)

If you are a fan of the S&P High Yield Aristocrats (SDY) but want more diversification try the PowerShares Dividend Achievers which only hold 17% of it holdings in financials services sector, followed by industrial services and consumer goods: each with 15%. PFM currently yields 3.57%.

When looking at dividends, don’t forget the yield is from historical dividends and many companies such as one from the financial sector have cut their dividend, if not completely eliminating it.

Always Check Sector Holdings

An ETF like PowerShares High Yield Dividend Achievers (PEY) might grab your attention as something that you would want to invest in, but take a look at the sector holdings below:

With almost 70% of holdings in the financial sector, this ETF lacks diversification. Why not just buy a financial ETF such as the XLF (Financial Select Sector SPDR)?

As with any investment do your research. Income ETFs might be good for a source of income but usually don’t offer much for growth.