This Pure Play ETF explained is needed to understand this latest rage in ETF investing. Most ETFs are similar to mutual funds that have a broad focus to limit the risk of the investing securities. These were the first ones that were mirrors of the different indexes.
Then came the sector specific ETFs. These were more focused, but still similar to many mutual funds that were available to investors. The new pure play ETFs are more closely focused than the sector specific funds.
Many ETFs have as many as 30 to 50 different investments in their portfolio, while the new pure play can have as few as 3. An example is the new Teucrium Corn Fund (CORN) which has a portfolio of just 32 corn future contracts.
Each future is slightly different which presumably makes this a diversified investment. The first third is on the daily tracking of the price of corn. The second third is on a farther time in the future, just like the last third is even further in the future.
This appears to be just other highly speculative vehicles that will most likely profit the company that sponsor it the most, according to Money Morning contributing editor Shah Gilani. The more profitable this new ETF is, the more fees that can be charged, so investors can make money. But it is at a higher risk than other types of securities.
If speculating on a commodity is part of your investing philosophy, then this is another vehicle that is at your disposal. These are derivatives, but tamer than others that are at investor’s disposal. There are, however, hidden risks.
While most ETFs are passive and have fees as low as 0.25%, these actively traded ETFs are charging fees over 1.50% at times. This Pure Play ETF explained is to show there is another investment vehicle, but do your own research and do not believe what the stock brokers are encouraging you to invest in. They are in this to make money from your money, not to make you money.
For additional resources about ETF on this website, please view Japanese ETF.
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We strive to bring you the latest and most accurate data possible from the home sites of the investment institutions we name. Always remember – the bigger the risk, the larger the reward or loss. Invest with caution.
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