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Add Exchange-Traded Funds (ETFs) to Your Portfolio

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I like Suze Orman’s articles better than her call-in television show. In a recent Yahoo Finance article, Suze extolls the virtues of ETFs (exchange-traded funds). ETFs are like mutual funds, tradable like stocks. Each ETF tracks a combination of stocks that fit an investing goal or market sector. However, since ETFs trade like stocks, you’ll incurr a transaction fee by your brokerage each time you trade. This makes ETFs better for lump-sum investments, not periodic or dollar-cost averaging.

The article wouldn’t be Suze Style without a “listen up,” and her column delivers.

If you think the stock markets are going to continue to go down, listen up: There are now a handful of ETFs that allow you to short some major market indexes. That is, when those indexes go down in value, the share price of a short ETF goes up.

I like the idea of hedging, but in my time frame for investing, I’m pretty sure the market will (eventually) head upwards.

Suze continues to discuss ETFs that track commodities like oil and metals. Here’s something interesting that I didn’t know about investments in gold:

According to the IRS, gold bullion is considered a collectible, so any long-term capital gains when you sell shares of GLD will be taxed at a maximum 28 percent rate rather than the typical 5 percent or 15 percent max rate you pay on gains for regular stock investments.

With gold $100 down from its recent high, this may be an investment to think about.

Published or updated August 17, 2006. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

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