Futures For You  |  DEC 2006

Futures For You by Dan O’Neil

Stocks & Commodities V. 24:12 (69): Futures For You by Dan O’Neil INSIDE THE FUTURES WORLD Want to learn how the futures markets really work? Dan O’Neil, a principal at online futures and forex broker XPRESSTRADE (www.xpresstrade.com), responds to your questions about today’s futures markets. To submit a question, post your question to our website at http://Message-Boards.Traders.com. Answers will be posted there, and selected questions will appear in a future issue of S&C. ETFs vs. FUTURES I’ve been reading about commoditiesbased exchange traded funds and am wondering about the differences between investing in exchange traded funds (ETFs) and investing directly in the futures markets. Does one have any major advantages over the other? It’s no secret ETFs have emerged as an increasingly popular investment option for individual investors. What started as a lightly regarded curiosity in 1993 with the debut of a single ETF tied to the Standard & Poor’s 500 has exploded into a booming mainstream marketplace, with more than 300 specialty ETFs now being offered by a host of investment firms. Most ETFs are essentially baskets of securities that track an index, much like plain-vanilla index mutual funds, but trade like stocks on a regular stock exchange. ETFs tend to appeal to investors who like to dabble in particular market sectors but perhaps lack the dedication to dig into them. Someone who’s interested in adding an energy component to his or her stock portfolio may choose the basket approach of an energy-focused ETF over the idea of researching, investing in, and monitoring a number of individual utility companies.

by Dan O’Neil