Letters To S&C by Technical Analysis, Inc.
Distrust of ETFs
I have read all of Alexander Elder’s books and have found his insights both coherent and useful for me as a trader. Elder has mentioned that he does not like/trust investing in exchange traded funds (Etfs). I would like to know if he could explain what his hesitancy is specifically. What exactly is his worry with the use of an Etf as a trading tool?
In addition, I have put together some very interesting information and the math behind the real hidden problem with leveraged Etfs (including graphs of real price movements compared to the underlying index), which I’d be happy to share with Elder if that would be something of interest.
Alexander Elder replies:
Thank you for your kind comments.
I think you have answered your own question: Etfs do not track the underlying well over a period of time. This nukes their value as trading vehicles for me. Of course I would enjoy looking at your research. I always pay attention to serious research.