Exchange Traded Funds (ETF) can be an excellent way to invest. But not all funds are created equal. Some ETFs do a poor job of tracking the underlying asset or sector that they attempt to mimic.
For example, last year West Texas Intermediate Oil appreciated over 100% yet the ETF that tracks it, USO, was up less than 43%. (see chart)
USO isn’t a bad fund, in fact, it’s one of the best managed ETFs in the commodity sector. The problem is that funds which employ sophisticated trading strategies (niche sectors, commodities, inverse, x-multipliers) do so at a high cost…which may deteriorate principal. This is referred to as DECAY.
I discuss this subject in a recent YouTube video: https://youtu.be/EAI1f_7hgNQ
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