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Over the past two years, we've been discussing the difficulty retail investors have faced when trying to short most ETFs beneath the top half dozen or so issues. It's been a serious ETF short-coming that needs resolution especially if these new issues are released.

Various ETF sponsors like to create these new issues when they perceive demand to be the strongest from a bullish perspective.

Every investor knows it’s important to diversify their portfolios. However, just diversifying into various market sectors that trend in the same direction doesn’t carry through very much. Doing so may just add to transaction expenses and give investors a false sense of accomplishment.

Most knowledgeable investment professionals know that calculator uncorrelated savings to an investment portfolio is more likely to fill in true diversification, reduce risk and generate superior overall performance. New rumored and proposed commodity-based ETFs (silver, crude oil, and currency markets as well) are, for the most, part well-suited to get by true diversification.

Most seasoned traders are just as likely to be short a item as long. by virtue of all, we’re dealing with commodities. stock market prices, and to a lesser extent stranglehold and stocks, are driven higher or lower purely by perceived and real supply/demand factors. Unlike stocks, goods have no “earnings” or other similar fundamental issues that drive prices. Speculators and working hedging affairs dominate whether for grains, energy, metals and so forth making for heavy two-way (long/short) activity.

Gold ETFs have been nearby for nearly a year and their issuance has been, and continues to be, well-received. Now an ETF for silver and crude oil (along with a rumored currency-based issue) are essence proposed. This is potentially great news. Great, insomuch as casting these markets to a conventional investment portfolio can perform true portfolio diversification. However, there’s a big catch. If retail investors, like any typical feature investor, are unable to short these article ETFs, then investors are deprived of the ware diversification benefit—they can only be long or out.

Over the past two years, we’ve been discussing the difficulty retail investors have faced when trying to short most ETFs subordinate the top half dozen or so issues. It’s been a serious ETF short-coming that needs resolution especially if these new issues are released.

Various ETF sponsors like to create these new issues when they perceive demand to be the strongest from a bullish perspective. This is understandable as long as they want a successful underwriting to earn fee income. Institutions are able to create new shares in increments of generally 100,000, (an plateau well-beyond the typical retail investor’s capacity) and then if they want, short. This suits sponsors cause with each new share issued, they get more fee income. Retail investors are left to try shorting ETF shares that earlier exist in float. Sponsors have no financial incentive to give a lift them in this regard and most exaction firm stock loan departments are unprepared.

Don’t get me wrong, I’m very excited to have these issues available. They are the “missing link” that could open up mainstream investors the opportunity to hit town true portfolio diversification. However, I’m concerned that these new issues will have only a one-sided benefit. If retail investors are able to take do no harm of all facets of commodity-based ETF investments, then the dream of individuals living able to create their own hedge fund can be realized. This would be a historic breakthrough.

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