When an ETF/ETN is new to the market ...

[DJofSD]

... can you, should you treat it like an IPO?

[Valuist]

Interesting question. I'm not really sure.

I think the real key is who makes up the ETF. Right now, those commodity ETFs are just getting killed. I have traded several ETFs although right now I have no position in any ETFs.

[LottaKash]

Interesting question. I'm not really sure.

I think the real key is who makes up the ETF. Right now, those commodity ETFs are just getting killed. I have traded several ETFs although right now I have no position in any ETFs.

Those Pesky ETF's, and IPO's and ETNs just give me FITS........:lol:

[MakinItHappen]

... can you, should you treat it like an IPO?

I certainly would not think so, but I guess it may depend on exactly what you mean by "treat it like an IPO?" perhaps you could expand on the question...

Best of Luck To Everyone!

MakinItHappen

[DJofSD]

When an IPO is first traded there is some uncertainty regarding the price. It could be priced equitably by the underwriters or it could be undervalued. Can the same thing happen with ETFs/ETNs?

[Valuist]

I agree with your point on IPOs but an ETF is just a collection of stocks....unless the ETF was for brand new IPOs, the ETF value should reflect the composite value of the basket of stocks.

[RaceBookJoe]

I agree with your point on IPOs but an ETF is just a collection of stocks....unless the ETF was for brand new IPOs, the ETF value should reflect the composite value of the basket of stocks.

I think you are correct in your statement. I like ETF's and think they may be a good vehicle for investors who dont have the time to drill down to the best stocks....IF they can find the stronger sectors, they can stop there and go with an ETF. To me, they are even safer than individual stocks, because they are a basket of stocks....only way to get really hurt would be if the entire sector gets hit. I will say though, they are no better than anything else if you cant find the hot sectors, bad choices are bad choices. rbj

[DJofSD]

I agree with your point on IPOs but an ETF is just a collection of stocks....unless the ETF was for brand new IPOs, the ETF value should reflect the composite value of the basket of stocks.You assume the individual issues are fairly valued when the ETF/ETN is created. That might not be true especially if they weighting favors an issue that is out of whack.

I guess another way of asking the question is can you determine if an ETF/ETN is a value play?

[MakinItHappen]

When an IPO is first traded there is some uncertainty regarding the price. It could be priced equitably by the underwriters or it could be undervalued. Can the same thing happen with ETFs/ETNs?

I think Valuist basically has answered this question... the uncertainty of the market valuation does not exist for new ETFs/ETNs like it does for an IPO. The underlying securities/commodities that comprise the ETF/ETN are already traded and the current market value is established for each component. The value of the ETF/ETN just moves in lockstep with the underlying securities/commodities that comprise it.

The advantage of ETFs/ETNs is that they have lower expenses than mutual funds. This may vary though depending on whether it is a passive ETF/ETN (ie-tracks index, sector, commodity, etc) or an actively managed ETF/ETN (ie-a portfolio manager is picking and choosing which securities comprise the ETF/ETN within certain parameters).

I do not believe that you are likely to find any significant "value" in an ETF/ETN unless you believe a significant component is misvalued by the market... in which case you could just target that specific security, provided it is available to the individual investor.

Best of Luck Today Everyone!

MakinItHappen

[chickenhead]

if an ETF is something new and makes something previously hard to trade or own directly easy, I think you could see some pent up demand for it, so as money flows into it the underlying prices rise. Rather than just tracking it begins to drive. I think we saw that with GLD, for example.

Not quite the same as an IPO being mispriced, but not totally different. The demand for GLD was higher than the pre-ETF prices indicated.

[MakinItHappen]

You assume the individual issues are fairly valued when the ETF/ETN is created. That might not be true especially if they weighting favors an issue that is out of whack.

I guess another way of asking the question is can you determine if an ETF/ETN is a value play?

Well, the only time you can evaluate this with certainty is when financial statements are issued on a quarterly basis. Of course, the problem with this is that it is 40+ days after the fact and who knows what has happened during that timespan. Any "value" that may have existed at that point, may no longer exist...

if an ETF is something new and makes something previously hard to trade or own directly easy, I think you could see some pent up demand for it, so as money flows into it the underlying prices rise. Rather than just tracking it begins to drive. I think we saw that with GLD, for example.

Not quite the same as an IPO being mispriced, but not totally different. The demand for GLD was higher than the pre-ETF prices indicated.

I guess I can buy this in a theoretical sense, but I am not sure it is really significant enough to really "drive" a whole lot of incremental value. In the case of GLD, for example, it is still a rather insignificant % of the total gold market (less than 1%) and there are negatives (ie- tax consequences and higher expenses) associated with ETF's vs. gold futures that effectively ensure it will stay that way.

Best of Luck Today Everyone!

MakinItHappen

[chickenhead]

I guess I can buy this in a theoretical sense, but I am not sure it is really significant enough to really "drive" a whole lot of incremental value. In the case of GLD, for example, it is still a rather insignificant % of the total gold market (less than 1%) and there are negatives (ie- tax consequences and higher expenses) associated with ETF's vs. gold futures that effectively ensure it will stay that way.

Sure, but most of that existing supply is not available for sale at current prices, if at all really, right? It doesn't seem like it would take much of a short term demand change to drive prices. I don't know what effect bumping yearly demand by say 10% has, but it seems it would have to be up. I fully admit tho, I don't know much about the Gold market, it seems it all depends on how quickly and willingly the existing holdings enter the market..

[lamboguy]

i like owning real gold, but for those tha have problems with storage, or buying the stuff, i reccomend GLD etf, there is also a double up play with a gold etf which i don't have the symbol for.

in my OPINION gold will be alot higher this time next year no matter which president gets in.