Tuesday, October 26, 2010

The World's Best ETF Web Site

ETF's are the new rage in investor circles. Correspondingly, a plethora of websites have sprung up to serve this growing interest. Which sites are worthwhile and which ones are a waste of time? I took a close look at 8 of the top sites based on traffic. The following are my findings.

8 ETF internet sites have been identified as the most popular ones.

The sites that will be evaluated are, in no particular order:


Yahoo Finance.com

Index Universe.com

Trading Markets.com

Market Watch.com

ETF Trends.com

ETF Database.com

ETF Guide.com

Here is a review of the basic background of each of the sites.

MorningStar.com: Founded in 1983 by Joe Mansueto, as an independent investment research company. The firm has grown to provide data on 300,000 investment products including ETFs. They provide several proprietary tools to help investors understand their investments.

Yahoo Finance: A sub site of the Yahoo brand launched in 1983. They are considered to be the top financial and research website in the United States. The site serves over 18 million visitors per month with financial news, quotes, company reports, ETF information, message boards, and a few hosted tools for personal financial management. They also provide aggregated information from dozens of partner sites keeping the content timely

Marketwatch.com: A large market news site owned by Dow Jones. Dow Jones is the leading provider of market news in the world. They own the Wall Street Journal, Barrons and various index names, among many other financial properties. The site contains a massive amount of up to date business and market news to over 6 million monthly visitors.

ETF Database.com: This site is published by a news media site called Accelerize News Media Inc. The parent companies goal is to provide users with comprehensive on line media solutions to reach specific audiences. News served with a side of education is the sites tagline. September was the latest news story posted on the home page. This site appears to be purely a news aggregation website with an ETF theme.

Index Universe.com: A news and research site containing up to date news, opinion and original research. Originally founded by proprietary trading pioneer, Steven Schoenfeld and Jim Wiandt, the site has expanded to a worldwide informational source. It focuses on index funds, ETFs, index derivatives, and passive strategies using these tools. This site provides a deep resource of study for those who want to delve into the inner workings of index products.
ETF Trends.com: This site was founded by author and asset manager, Tom Lydon in 2005. It contains up to date news stories mostly bylined by Mr.Lydon, educational material and an ETF analyzer. The ETF analyzer is a graph showing the past performance of each ETF and basic technical levels. It is always up to date and provides Mr.Lydon’s insights into the world of ETFs.

Trading Markets.com: Founded by Larry Connors, this site provides news, opinion and strategies targeted at the individual investor. Its home page is updated multiple times daily with actionable and current news and strategies. There is a deep resource of educational material from the very simple to that geared toward the sophisticated investor. What separates Trading Markets is their daily specific trade calls and actionable material. The contributors to the site are all market professionals with most being very active traders. This assures that the opinions and ideas provided by the contributors are current and up to date. It is geared toward the active investor with a tag line, “Making Great Traders”.

ETF Guide.com: Founded in 2003, this site contains up to date market news, a little education content and a subscription based ETF portfolio.

When evaluating any informational source, the first thing needed to be asked is how long have they been in business? The internet is full of sites with dubious value. Particularly, in the investment field, it’s important to know that an informational source has weathered several market cycles without closing their doors. Of the 8 leading ETF sites, only Morningstar, MarketWatch, Yahoo Finance and TradingMarkets have been in business longer than 7 years. In fact, startups ETF Database and ETF Trends have only been around a little over 2 and 5 years respectively. Although it’s important to note that older isn’t necessarily better. However, longevity in the internet business is a clear sign of doing something right.
All of the sites provide articles about ETFs. The question becomes is the information something that can be used to help make investment decisions? While most of the leading sites contain excellent data points and facts about ETFs, when it comes to current, up to date and actionable information they usually fail to deliver.

How to evaluate the value of the article content comes down to the investors goals. Is the reader just looking to increase knowledge? If this is the case, then any of the sites will serve the purpose. However, if the investor is seeking actionable, up to date information that teaches how, where, when and why to trade ETFs, the choices slim down considerably.

One must consider if the site actively operates a model portfolio. This is critical because it clearly reveals if the site actually has experience in the real world of trading and investments. While a model portfolio is far removed from an actual cash based investment portfolio. It can and will determine if the philosophy and tactics espoused by the site actually work in real life. Two of the leading ETF sites provide a model portfolio proving that the proprietors are more than simple internet entrepreneurs trying to catch the latest trend.

Another question to ask is does the site maintain a historic record of its recommended trades? This is critical in order to determine if the content is purely theoretical or actually work in real life. In the financial world there are many armchair investors and traders, some of whom appear highly learned. However, when put to the test of the real market, these untested theories often fail. Only a proven, well documented and complete historic record can separate the ETF dreamers from the actual practioners.

Backtesting is a major concept in professional investing circles. Backtesting is the proving of investment ideas over the long term via historical data. Backtesting determines if the theory has real world relevance over time. While a successful backtest will not guarantee success going forward with real money, it can and does clearly show what doesn’t and will not work. A successful back test is often the first step in evaluating trading strategies. It’s important that the backtest include enough historic data to determine the strategies viability across most market conditions. It is often referred to as quantification in academically minded groups. Only one of these sites provides a historic, backtested record of its suggested trades.

Backtesting means little if the site does not share the historic record with the users. This allows the investor to observe how the strategies develop overtime. It should show the good, bad and ugly of the winning and losing strategies. As can be guessed, the only site that provides backtesting also has a clear historic record of the results.

The most important point for many investors, does the site provide actual ETF entry signals? In other words, does the site provide real life, actionable, specific trade calls? The symbol and price level must be provided so that the investor can follow along with the trade in a real or practice portfolio. Without providing this critical information, trade recommendations are vague and easily tweaked to appear successful regardless of actual results. Once again, only one of the 8 sites is willing to put its reputation on the line by providing actual, clearly defined entry signals

As any investor knows, selling the investment is how profits are made real. Trading and investing is far more than simply buying and holding without selling. In fact, trillions of dollars are made but never realized as investors often hold when price drops back from the highs. Selling is the critical factor that determines how much an investment will make or even often if it will make a profit at all. To be actionable, selling recommendations must include specific price or technical level so the investor knows when to take profits or cut losses. Only one of the listed 8 most popular ETF sites provide when to sell information. As can be guessed, it’s the same site that provides specific entry criteria.

An important distinction is whether or not a service is based on the concept of trend following. Trend following often looks good in hindsight showing theoretical profits while the real life execution of such a strategy remains nebulous. Statisticians call this the hindsight bias. Trend following is a feel good method that looks great until it is actually placed into action. Trend followers often miss moves in reality that their theoretical models indicate were caught. This is dangerous ground for a trader/investor often resulting in getting enough multiple small losses to quickly deplete your investment capital. The site that provides entry and exit signals is the same one whose methods are not built upon the shaky, feel good ground of trend following. This sites methods are built upon long term, statistically valid tests and actual real life practice.

Who uses each of the services is another due diligence question to ask prior to trusting the information. Do professional money managers, proprietary traders, and full time investors use the information contained within the site when making decisions? Is the site more geared to weekend hobbyists playing with their lunch money? While it’s difficult to say as an absolute, we know that out of the 8 sites, 3 have a proven and active professional audience. These sites are Morningstar, Yahoo Finance, and TradingMarkets.

The last thing to be determined is there ongoing support from the site? Many of these sites are set up to basically run by themselves providing very little additional help for the investor than what is apparent. Does the site offer ongoing educational and actionable courses/materials that keep up to date with the ever changing world of ETF’s? Several of these sites look stale without much updating or refreshing of the material. Only one of the listed sites appears to be constantly updated with actionable suggestions while on the cutting edge of ETFs evolution.

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