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Lipper U.S. Fund Flows-February 3, 2016

By Tom Roseen Did we just see mutual fund investors turn on a dime? After yanking nearly $5 billion from their accounts the previous week, this past week’s data show estimated net flows of $2.1 billion into equity mutual funds-for their first positive flows week this year. Although the benchmark Dow Jones Industrial Average was up for the week, the scant 392 points probably wasn’t as important as a rising sentiment that 16,000 is as good a floor as any we’ll find in this market. But count equity exchange-traded funds’ (ETFs’) authorized participants among the unconvinced: they withdrew about $8.5 billion (net), backing out of the SPDR S&P 500 Trust ETF ( SPY , -$3.2 billion ) and the iShares Russell 2000 ETF ( IWM , -$1.2 billion ) , but they made modest contributions to the SPDR Gold Trust ETF ( GLD , +$758 million ) . Taxable bond mutual funds suffered their thirteenth weekly net outflows (-$523 million), but the week’s magnitude was the lightest yet. The Loan Participation Funds classification (-$333 million) notched its twenty-eighth consecutive week of outflows from mutual fund investors and High Yield Funds suffered outflows of $108 million as investors kept a wary eye on the junk sector. On the other hand, bond ETFs collected $671 million of inflows as the week’s biggest individual bond ETF inflows belonged to the iShares 7-10 Treasury Bond ETF ( IEF , +$412 million ) , while the iShares iBoxx $ Investment Grade Corporate Bond ETF ( LQD , -$423 million ) led the outflows list. Municipal bond mutual fund investors added $585 million to their accounts while the muni market gained 0.48% for the week-after the previous week’s little tumble. Money market funds saw outflows of $3.8 billion this past week, of which institutional investors pulled $4.2 billion and retail investors redeemed $400 million.

3 Key Questions To Ask When Considering An ETF

Thinking about investing in exchange-traded funds (ETFs)? Be sure you can answer these questions before you do. Choosing investments for your portfolio is a complex-and sometimes emotional-process. It requires research, a clear understanding of your financial goals and time horizon, and, of course, money. And it can be overwhelming: should you go with stocks, bonds or mutual funds? How about gold? One security that has seen a surge in popularity over the past few years is the exchange-traded fund (ETF) . An ETF is an investment vehicle composed of pooled funds that owns shares of an asset, such as stocks, bonds or commodities, and trades on an exchange, just like a stock. In some cases, an ETF will track an index (the S&P 500, for example), which means it tries to match the index’s performance rather than beat it. According to a 2015 Charles Schwab Investor Study , millennial portfolios have the largest share of ETFs of any investing generation: on average, 40% of a millennial’s investments will be in ETFs. In fact, millennials dig ETFs so much that 61% of millennial investors surveyed said they would increase their ETF holdings in 2016. ETFs appeal to investors for several reasons. First, there’s the price tag. The minimum investment for a mutual fund can range from $500 to $3000 ; the minimum investment for an ETF is the fund’s market price, which can be as low as a couple of dollars. Then there’s the risk factor. Due to their composition, ETFs have more potential to mitigate losses in the event of a downturn than an investment concentrated in a single stock . ETFs also tend to be more tax-efficient than mutual funds because their structure minimizes the opportunity for taxable events-selling holdings, for instance-which can incur capital gains. Considering that there are over 1,500 ETFs available on the market, how do you go about choosing the right one? The following three questions are key when it comes to the ETF selection process. What is the underlying index? Some ETFs track easily recognizable indexes such as the S&P 500 or the Nasdaq 100. Others, such as the Global X Millennial Generation ETF , track new indexes that investors know very little about. Because ETFs usually track an index, it’s often quite easy to find out what their holdings are. Pay attention to what stocks and bonds are included in an ETF, as well as the weight assigned to the holdings. This will allow you to determine which ETFs offer the asset allocation you want. What are the true costs? Each ETF has an expense ratio. This number, which is expressed as a percentage, is a fund’s annual expenses divided by its average assets for the year. The expense ratio lowers your returns, and it isn’t the only cost associated with ETF investing. Given that ETFs trade like stocks, every purchase and sale incurs brokerage commission fees. Do the math and figure out which ETFs seem best positioned to give you the biggest bang for your buck. How liquid is it? The ease with which you can buy or sell shares of an ETF matters a lot: it’s the difference between making money and losing it. When an ETF has low liquidity, it becomes more difficult for an investor to sell their shares and make a profit. So what affects an ETF’s liquidity? Holdings, the holdings’ trading volume, the ETF’s trading volume and the market climate all play a role. Take a look at these factors to get a sense of how liquid or illiquid an ETF is. Keep in mind: the more the underlying holdings are traded, the more liquid they are, which, in turn, makes the ETF more liquid. Like any investment, there are pros and cons associated with investing in ETFs, but if you want to add some to your portfolio, be sure to ask the aforementioned questions. Doing so will help you choose the best ETFs for your investment needs.

The Psychology Of Losing Streaks And How To Overcome Them

By Maria Meramveliotaki-Simon In trading, consecutive losses are very common and some traders do not take it at heart. Instead, they try to make the best out of it, learn, adjust their strategy or money management plan if needed and just get on with it. It is not always that easy, however, to have this attitude. It is not unlikely, if you ever had a number of consecutive losing trades, to have thought that you are an incompetent trader or that you are possibly not fitted for live trading. You may have experienced anxiety, disappointment and anger at yourself or anyone else that is involved (such as your broker or the market). This is a natural human reaction that has a chemical basis; a losing streak activates the production of cortisol, our body’s stress hormone. While cortisol’s primary function is to prepare our body to cope with danger by increasing glucose, the prolonged exposure to it that comes in tandem with losing streaks will render us anxious or even sad. Anxiety and sadness will then work as “containers” for negative thinking. Suddenly, we see the world through those black glasses and we may engage in various unhelpful thoughts: ” I am a loser”, ” I will never make it”, “Should have never traded”. But what happens as you think in this manner? Your anxiety, disappointment and anger increases and with them comes a lot of confusion, feeling scattered, unsure, lacking in confidence and belief. There are some typical ineffective behaviours that traders may then fall into such as Overtrade to reduce losses Revenge trade to get back at the market Become extremely risk averse and trade too small or not trade at all Give up and close trading account Escaping The Vicious Cycle Of Losing Streaks If you do engage in some of the ineffective behaviours mentioned above, it is likely that you will end up trapping yourself in a vicious cycle. This is because risky trading behaviors such as overtrading or revenge trading are likely to make you lose again and, therefore, evoke the same unpleasant emotions and unhelpful thoughts that led you to it. Click to enlarge In order to exit the vicious cycle of losing streak psychology: 1. Become aware of the emotions that have emerged. Ask yourself: What am I feeling? Am I disappointed? Anxious? Am I Angry? 2. Understand the thinking pattern that accompanies these emotions. What is your mind telling you? Is it pulling you down, sabotaging you or maybe intimidating you? Typical thoughts following a losing streak would be: I am a lousy trader. Should have given up long time ago My strategy must be wrong; I have been wrong all the way I cannot afford to just let it be. I must make back the money I lost It is just embarrassing to have lost more than half of my balance 3. Are you about to make trading decisions according to what you are feeling or thinking? Is this the best way to trade? Has this helped you to succeed in the past? 4. You can choose to break the cycle. Having unhelpful thoughts and emotions is very different from acting on them . Remember that if you act on them, you maintain the vicious cycle. Instead of acting on your thoughts, keep your purpose in mind and act according to your goals: Examine if there are aspects of your strategy & methodology that need to be changed. You may opt to do so by going back trading on a demo for a while. But while demo can provide you with valuable insights about your strategy, it cannot simulate real market conditions; your psychology is going to be completely different when you trade live. Take a look at your risk/reward ratio. Are your stop losses too narrow or too wide? It often takes the time to determine the best ratio and you may have to be wrong before you get it right. When you trade, focus entirely on the present moment. Your mind may attempt to remind you of the past, or scare you with negative future possibilities. You must learn not to buy into it, because if you do, you will end up back in the vicious cycle. Your focus must be what’s happening in the market now. Keep educating yourself on trading. You could attend webinars, read online tutorials or join relevant forums. Exercise patience. You may be in the right way to achieve your trading goals and it could be that it just hasn’t happened yet. Be patient, have belief and don’t buy into negative self-talk. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.