Investment Tip: Exchange Traded Funds

Exchange traded funds (ETFs) are a great tool for investing, giving you many of the advantages of mutual funds withouot the high costs. Investors have put $33 billion into these instruments this year, compared with $156 billion for mutual funds. ETFs are rapidly growing in popularity. They are computer-controlled mixes of stocks for targeted sectors that allow you to benefit from a sector's fundamentals without the risk of a single stock. They can also allow you to easily invest in foreign markets that aren't easily accessible through US online stock trading services. For example, most investors wouldn't know how to invest in Samsung or other Korean stocks, but they can get a piece of the expanding South Korean economic engine, including a good chunk of Samsung, by investing in EWY - the ETF for the Korean market. EWY is an ETF I owned for a while - and should not have sold yet, since Korea continues to boom.

Another great ETF is GLD, which allows you to easily and simply invest in gold bullion. OK, it doesn't mean you get bullion in your safe, but it allows you to purchase shares that follow the price of a 1/10 ounce of gold (almost $50 as of today). If you think gold is going to go way past $500 an ounce, as I do, then putting some of your 401(k) or personal funds into GLD might make sense. I think it's especially powerful for a 401(k), since many 401(k)s can't be used to buy bullion. Now you can get some of the benefits of gold in your retirement account (but actual ownership of precious metals is more secure).

Barclays is trying to establish an ETF for silver, but the powerful Silver Users Association is fighting that. They are afraid that it would increase demand for silver and make the price jump up too much. Really! That's a pretty good reason for getting into silver now, in my opinion. FYI, one of the silver stocks I recommend, SLW, was up nearly 7% today, and I expect it and my other favorites to continue their long term march. Also keep your eye on GG (GoldCorp) for gold stocks. A powerhouse!

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