Courtesy of CNBC..By: Lee Brodie
Exchange traded funds are among the more popular ways to trade. Called ETFs on the Street they allow investors to diversify risk through a basket of stocks.
A pro like trader Steve Grasso of Stuart Frankel who works on the floor of the NYSE, can barely move a foot or two without hearing “Buy the XLF or get me out of the GLD, now!’
But these and other popular ETFs may not always be your best bet.
According to Matt Hougan, IndexUniverse president of ETF analytics, there are alternative ETFs that aren’t as widely known, but may actually better serve your needs. He profiled five of them on CNBC’s Fast Money. They follow:
Sector Widely Traded
Gold GLD
Hougan’s Alternative: IAU
Looking at the GLD, Hougan says the IAU holds exactly the same thing. “It’s plenty liquid and owning it is about half the cost of the GLD.”
Sector Widely Traded
Financials XLF
Hougan’s Alternative: IYF
Hougan says this is something of a popularity content. “People know the XLF .” However, the XLF only tracks large caps. (Click here to see top holdings on Yahoo! Finance.) If you want exposure to the entire banking sector Hougan recommends the IYF for “the full spectrum.” Sector Widely Traded
Junk Bonds JNK
Hougan’s Alterantive: HYG
Hougan says most investors don’t know that JNK is further out the junk spectrum. “The HYG holds slightly higher and safer securities,” he says.
Sector Widely Traded
Dividend Equity DVY
Hougan’s Alternative: HDV
“DVY was first, so everyone knows it,” explains Hougan. And the ticker is memorable. However, he explains that HDV focuses on higher yielding securities as well as lower volatility securities making it preferable for many retail investors.
For the entire CNBC story, click here