StageInvesting +Elliot Waves

Hi

ETF or Mutual Fund investing for us is to play a theme when we’re not sure about a particular company to ride in a sector or a country.

For example,in US we’re not aware of several companies fundamentals but if on macro levels we are bullish on a certain sector or country then ETF investing can be a good way to play the theme.

For example, we feel that India, Mexico and Vietnam can be beneficiary of global China+1 trend , so how to take advantage of this likely trend !

We understand India so we can select few companies to take advantage of this likely trend but we have no knowledge about the companies in Vietnam and Mexico. If we want have some allocation,one way is to invest in US based ETFs (US has ETFs for almost all the countries ) e.g. VNM and EWW are ETFs for Vietnam and Mexico .

Other reason can be lack of knowledge of a particular sector.For example in India , we are not having deep knowlege of Pharma sector , not sure of future growth path of most of the companies due to complexity and regulatory issues .
But we are long term bullish on this sector, so we try to ride it via MF . MF is a proxy to choosing a basket of stocks and some sector expert managing the same.

Pros and Cons of ETFs can be shortlisted as follow:
Pros
1, Can play a sectoral pr a country theme even if are not sure of specific companies in those sectors/countries
2. You get experts’ services to manage those funds
3. You don’t need to worry about particular companies as it is a basket-approach. If the theme plays out, you will make money.
3. In case of ETFs , there is no exit load .These can be traded like stocks ( MFs have little disadvantge in this cae as they have exit loads)

Cons

1. In MFs, ETFs ,one might get only compounding returns if the call goes right but multibagger returns can only come if you can choose the best company in the sector.
2. Entry /Exit loads in MFs
3. Choosing the right MF/ETF in a particular sector becuase there are multiple choices in every sector/country.

Techicals do work in these cases as they are just like index-tracking in a particular sector/country.

Hope our response is helpful.Regards.