1 Answer

Rather than buying individual stocks, many investors are now turning to more specialized funds that focus on specific industries, indices, and countries, to offer them more diversification in their portfolios. Such specific funds, known as ETF or Exchange Traded Funds, are quickly becoming popular for investors, traders, and hedgers these days. ETFs are like mutual funds because they own a bucket of individual stocks within a specified industry. For example, GDX is an ETF holding a bunch of gold mining companies, whereas EWZ is another ETF holding Brazilian company stocks. These ETFs trade throughout the trading day like stocks do unlike mutual funds that get one price per day and that's the closing price.

With ETFs, you can go long, double long or triple long a certain industry or index such as the S&P 500. Conversely, you can go short, double short, or triple short as well. The double short ETF for financials, SKF, is an example.

The fees paid would be comparable to the fees paid when you buy an individual stocks.   As I mentioned before, these look like mutual funds but trade like stocks.  You can sell them as soon as you buy it as there's no restriction as to how long you would need to own the position, except you'd have to wait 31 days to buy the same ETF after you have sold it at a loss in your taxable account.