5 ETF Myth Busters

Why Following Wall Street's
Advice Will Cost You

Plus, Our Short Positions Soar as Stocks Slide
 

Dear Moneynews and Newsmax Reader:

Jesse Livermore may not be as much a household name today as Warren Buffett, but his resume is equally impressive…especially when you consider what he accomplished and when he did it.

You see, he made more than $100 million in the Crash of 1929 by margining his account to the hilt and aggressively buying and short-selling stocks when economic conditions faltered and stocks trended lower.

Then, when the market began trading in a volatile sideways pattern, he sat on the sidelines in cash until more certainty surrounded the future direction of stocks.

There are definite parallels between today's climate and the one in which Livermore grew his fortune.

He never gave into the buying pressures of Wall Street, always following his own recipe for success.

I'm sure you are hearing the constant chorus of Wall Street "experts" telling you that now is the perfect time to invest for any number of reasons: stocks are cheap, dollar-cost averaging will pay off in the long run, defensive stocks are a can't-miss in this environment, etc.

Don't fall pretty to the shills on Wall Street.

In my more than 25 years of investing in the financial markets — even as a money manager, myself — I have met hundreds of investors who have lost lots of money by following Wall Street's bad advice.

I have managed, though, to take a page from Livermore's book over the past few dismal months and turned negatives into positives. Back in September, when we held short positions and latched onto interest-rate sensitive positions — the cheerleaders on Wall Street were screaming for you to buy.

Meanwhile, the two double-leveraged bear ETFs we bought that go up twice as fast as the S&P 500 and Russell 2000 go down have already produced gains of 11.6% and 18.9%.

Now that Wall Street can't argue with falling stock prices, they've turned to the stocks- are-cheap mantra. In other words, keep buying.

Words may change, but sentiment remains the same.

That's why I've devoted the next issues of The ETF Strategist to 5 ETF Myth Busters and Why Wall Street's Advice Will Cost You.

Those who've been with us since the inception in September 2007 have captured big profits. Our winners include PowerShares DB Agriculture Fund +31.1%, and ProShares Ultra Short Consumer Services Fund +28.7%.

Our latest issue of The ETF Strategist will blow the following 5 myths to smithereens.

Busting Myth After Myth

Myth No. 1: ‘Buy and Hold'
The most popular Wall Street myth is that if you employ a buy-and-hold strategy,you simply can't lose. In other words, stock prices rise over long periods of time so long-term investing will always pay off.

Busted!
By using ETFs to capture exploding trends—knowing when to buy and just as importantly, when to sell — you can profit while the rest of the investment world nervously watches this skittish economy toy with their vulnerable portfolios. Our portfolios are up 17.5% and 5.4% since September, while the S&P 500 is down 9.1%!

Myth No. 2: Dollar-Cost Averaging
If holding onto a losing position will eventually pay off, surely adding to that losing position as it falls in price will pay off even more. Or so the Wall Street theory goes.

Busted!
Dollar-cost averaging and buy-and-hold go hand in hand. Neither can accomplish our goal: to bring you profitable recommendations that will beat the S&P in bull markets and protect you from losses in bear markets.

Myth No. 3: Diversification
Another popular Wall Street myth is that investors should stay fully invested in the financial markets at all times by holding a well diversified portfolio of stocks, bonds, commodities, precious metals (gold/silver), and real estate investment trusts (REITs).

Busted!
Investing in the right sectors of the market at the right time will produce significantly better long-term results than investing in a broadly diversified portfolio of financial assets. Legendary investor (and founder of Investor's Business Daily) Bill O'Neil said, "Diversification is for people who don't know what they're doing."

Myth No. 4: Defensive Stocks
Learn what Wall Street means by using "defensive stocks" during a market downturn, and why you'd be in a hole the past month if you owned Procter & Gamble (PG), Coca-Cola (KO), Altria Group (MO), and Johnson & Johnson (JNJ).

Busted!
Forget about being defensive, go on the offense. The ETF Strategist's Asset & Sector Allocation Model allows us to pinpoint sectors and industries poised to do well in the next 3 to 6 months and reveal those showing weakness. Find out the ETFs that may earn you 25%-50% over the next few months!

Myth No. 5: Stocks Are Cheap
Find out why this Wall Street myth is the worst one of all and how historical data doesn't offer any evidence to support this cheap stock theory.

Busted!
By using ETFs you don't have to concern yourself with individual P/E ratios, valuations or stock prices. It's all about pinpointing sectors about to explode, and we're confident about making money over the next few months — when stocks could drop further — because our mix of ETFs will benefit from a slowing economy, falling short-term interest rates and rising inflation.

To download the next issue of The ETF Strategist with 5 ETF Myth Busters and all of our current top ETF recommendations, simply click here now.

Growing Like Wildfire

About David Frazier Hi, I am the editor of The ETF Strategist, published by Newsmax. I also contribute a weekly commentary in the Global Economic Briefing e-letter, which is read by more than 165,000 investors each week. I have a diverse background in the financial services industry, having worked for such well-known firms as The Dun & Bradstreet Corporation, TD Ameritrade, and William O'Neil & Co. (the publisher of Investor's Business Daily). While working as an equity analyst in 2003-2004, my stock recommendations generated an average annual return of 45.7%, compared to 19% for the S&P 500. My Asset & Sector Allocation Model uses 97 financial and economic variables and 13 investor sentiment indicators to identify the current stage of the business cycle and determine which asset classes and economic sectors are likely to perform best in the next 3 to 6 months. This model reveals whether or not to invest in ETFs comprised of stocks, bonds, commodities, precious metals, or real estate, as well as sectors such as basic materials, financial, or healthcare, or in foreign markets. My Relative Performance Model ranks the price performance of the major economic sectors — 130 industries within those sectors — relative to the others over the most recent week, month and three-month timeframes. This is a momentum model that identifies the sectors and industries that have recently been improving in performance, and are likely to continue to move up in rank as well as those that are falling back. These two models reveal which sectors and industries show weakness and should be avoided. After identifying which asset classes, economic sectors, and specific industries are most likely to be the top performers in the coming months, I use my ETF Comparison Model to analyze every ETF with significant holdings in our target market segments. This model compares the historical performance records of ETFs during various market environments and helps determine which ones are the most likely to produce the best risk-adjusted results. No other investment product captures the big financial moves as well as ETFs, but you need to know which ETFs are the best to buy! That's where The ETF Strategist comes in.

Wall Street can fight the onslaught and interest in ETFs all it wants, but this battle is definitely one-sided.

According to data from Financial Research Corp., active open-end mutual funds had almost $4.2 trillion in U.S. assets in 1999, or some 92% of the market. That share total has steadily fallen in the past nine years, marking the end of a historic bull-market run by stocks.

Some $143 billion in ETF sales took place in 2007 compared with about $65 billion a year earlier.

In the next five years, they're projecting that ETF assets will increase at an annual average clip of 22% to top $1.5 trillion by 2012.

During that same period, mutual funds (active and passive) are expected to grow by about 10.5% per year to $13 trillion in five years.

Plenty of investors have grown to love the diversification, flexibility and tax advantages of ETFs:

• More than 500 ETFs cover every major index, sector, and industry.
• They provide investors with a way to quickly and conveniently trade at any time of the day with the diversity of mutual funds and the low trading costs associated with stocks.
• Plus, most ETFs are also far more tax-efficient and have fewer investment restrictions than mutual funds and more transparent, reporting their holdings daily.

It's obvious Wall Street is alone in its thinking. Feel free to ignore the mumbo-jumbo. We do.

The ETF Strategist's Unique, Profitable Approach

We've had great success by taking a unique approach in The ETF Strategist and turning a deaf ear to all the noise.

My goal each and every month is to show you how to hit the "sweet spot" of exceptional growth and make 25% to 50% profits over the next 3, 6 and 12 months.

You'll find that ETFs are easy to use. You can make money using them when stock prices are going up, down and sideways. They protect your portfolio against losses at times when other investors are losing their shirts.

ETFs work equally well for conservative, moderate and aggressive investors. They allow you to invest in virtually every asset class, sector, industry, country or region, often at 1.5 and 2 times the return.

All you need is to succeed is the extra edge that The ETF Strategist gives you!

Your Ticket To Consistent Profits.

With The ETF Strategist, you'll get everything you need to know to begin profiting immediately from the tremendous opportunities ETFs offer — starting with how to make big profits in the coming year from the most explosive profit waves.

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Also in between monthly issues you'll stay up-to-date via our Weekly E-Mail Update . These are sent every Friday when the market is open to review the past weeks activities that may have affected our holdings. So you'll always be in touch with me.

In addition, you'll get up to 5 FREE special reports for giving us a try.

The ETF Strategist is not a day trading service.  We typically hold positions anywhere from three months to a year or more! In just ten minutes a week, you can take advantage of the tremendous profit opportunities ETFs offer in both UP and DOWN markets.

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