Table of Contents
What is an ETF (exchange traded fund)?
An exchanged traded fund (ETF) is a unique investment fund that has properties of both mutual funds and stocks. ETF funds can hold stocks, bonds, commodities, and currencies and they are known for their low cost, efficient tax structures, diversification, and stock like characteristics, such as shorting. Many ETFs also use leverage, which increases their returns and volatility. ETFs are one of the fastest growing investment types, because they offer the diversification of mutual funds with stock-like advantages.
What is an ETN (exchange traded note)?
An exchanged traded note is a debt instrument that is linked to the performance of a benchmark. At maturity of the debt instrument, investors in exchange traded notes receive cash for their shares. ETNs retain some stock characteristics, such as the ability to go short. They are also tax efficient and closely match the performance of the benchmark they track. ETNs can be bought and sold throughout the day, and they provide access to many unique markets. ETNs are known for their ability to leverage the returns of the benchmark they track. Credit worthiness and liquidity issues are major disadvantages of ETN investments.
How does WikiWealth Improve ETF and ETN research?
Traditional research reports for mutual funds focus on the tenure of the management team and the past results, but these variables don't apply to ETFs or ETNs, because no one is picking or choosing investments. ETNs and ETFs are fixed investment portfolios, so WikiWealth developed a new technique to make accurate investment decisions for ETFs and ETNs. ETFs and ETNs are a combination of underlying stocks that form the fund. When each individual investment changes in price, the whole fund changes; therefore, an analyst must research each investments in order to understand the potential of the fund. If the average investment was rating a buy, then the fund is also a buy. WikiWealth has research for over 3,000 companies. We use a weighted average of the individual company potential in order to determine the fair value of each fund we track.
Why doesn't WikiWealth Show an ETF Fund Price?
The ETF fund price is irrelevant. The most important factor in an ETFs value is the potential of the group of stocks within the ETF fund. WikiWealth ignores the ETF's price in order to concentrate on the value of the underlying investments within the ETF fund. Investment potential is the most important number on WikiWealth's ETF research reports.
How does an ETF Fund Increase Diversity?
When a fund manager purchases different investments, the diversity of the fund increases. The more different each investment, the more diversified the ETF fund. Diversity is good, because it lowers the risk, as measured by volatility.
What is ETF Fund Research?
WikiWealth created fund research to measure the potential of each ETF fund to increase in value. Like WikiWealth’s stock research analysis, ETF fund analysis uses statistics to determine if the ETF is good. These statistics measure each individual component of the fund to determine whether they are undervalued or overvalued. When we add those components together, we come up with a value of the ETF fund on an aggregate level.
Why does ETF Fund Research Need to Improve?
The majority of fund research tries to predict future performance by looking at past results. Industry evidence suggests that ETF research that uses past results to determine future performance is not accurate. Additionally, most fund managers fall short of the S&P 500 benchmark over a long time period.
Modern day fund research is like flipping a coin. The more times the coin reads head, the more often industry research will predict heads for the next flip. This doesn’t make sense, because the next flip has a much greater chance of landing on tails. When research predicts future performance using past results, those predictions are likely to be incorrect.
How Does WikiWealth’s Fund Research Make Investing Easier?
WikiWealth’s gives an investment potential rating for each ETF fund. This rating measures the potential of the ETF fund to increase or decrease in value. It also gives an easy-to-understand rating system that investors can use to predict the relative performance of each ETF fund.