some time ago, Jim Cramer said ETFs do not make sense, now I agree with him. Same as ETFs, index futures also are not suitable for trading. Maybe they are good for long-term investment.
Since you ask so politely, I will answer: 1. cancellation among components/sectors. 2. not subject to direct buying/selling. 3. murky conversion between components and the instrument. 4. arbitrary weighting. 5. unclear roles of leader/follower. 6. friction between futures and cash. 7. Red_Ink.
The larger the ETF, the less problems you will have. IMHO, only 20 or 30 ETFs can be traded efficiently, the rest are just fillers. Note the word: efficiently.
I agree with zgtrader. I only trade ETFS both long and short time with no problem. You have to pick the right ones. Never pick a new one.
ETF's were a great idea years ago. I made good money with them. But they're just fee-sucking machines for institutions that "sponsor" them now. Might as well trade the individual components in most cases. Top 30 volume ETFs are ok, the rest suck.
ETFs are the only thing that I recommend to family members who want to profit from a falling market. No way I'd recommend an individual stock to people who think that holding an overnight short GE carries the same risk as a bare-bones, cash-poor biotech who just scored a phase III approval on their lead candidate.
risktaker how much money would you need to buy each stock in the S&P 500. Oops for got my dentist has all my money 2 root canals and 3 caps ago. Thats why I buy ETFS. Seriously I would limit my selection to the top 20 in volume and have been around at least 3 years.
Just to add, these are the 20 big ETFs (sorted by volume): SPY S&P Dep Receipts XLF S&P Sel Financial Spdr Fund QQQQ PowerShares QQQ Trust Series 1 EEM iShares MSCI Emerg Mkt Index F FAZ Financial Bear 3x Shares IWM iShares Russell 2000 Index Tr UYG Ultra Financials ProShares UNG United States Natural Gas Fund SDS UltraShort S&P 500 ProShares FAS Financial Bull 3x Shares SSO ProShares Ultra S&P 500 SRS UltraShort Real Estate ProShrs URE Ultra Real EstateProShares SKF UltraShort Financials ProShare EWJ iShares MSCI Japan Index Fd IYR iShares DJ US R/E Index Tr FXI iShares FTSE/Xinhua China 25 QID UltraShort QQQ ProShares EFA iShares MSCI EAFE Index Tr XLE S&P Sel Energy Spdr Fund Although, some consider the below list to be the most popular. SPY S&P Dep Receipts QQQQ PowerShares QQQ Trust Series 1 EEM iShares MSCI Emerg Mkt Index F IWM iShares Russell 2000 Index Tr XLF S&P Sel Financial Spdr Fund EWJ iShares MSCI Japan Index Fd EFA iShares MSCI EAFE Index Tr FXI iShares FTSE/Xinhua China 25 IYR iShares DJ US R/E Index Tr GLD SPDR Gold Trust XLE S&P Sel Energy Spdr Fund EWT iShares MSCI Taiwan Index Fd EWZ iShares MSCI Brazil Index Fd DIA Diamonds Trust, Series 1 XLV S&P Sel Health Care Spdr Fund XLI S&P Sel Industrial Spdr Fund XLB S&P Sel Materials Spdr Fund EWH iShares MSCI Hong Kong Idx Fd XHB SPDR S&P Homebuilders ILF iShares S&P Latin Am 40 Index