This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Off the Mark on ETFs

NEW YORK (TheStreet) -- A few weeks ago I was on "Street Signs" for a segment about income investing. I got a good teasing from friends for saying "maybe you don't get it" in response to Herb Greenberg's protestations to the contrary throughout the segment.

Fast forward to this week and his witch hunt of ETFs. As much as he knows what questions to ask about individual stocks, I don't think he is asking the right questions about ETFs. This matters because I think he bends a lot of ears, but asking the wrong questions does not advance the conversation.

Maybe levered and inverse funds should have a cigarette-like warning on them but to the segment the other day and the question what purpose do they serve, they serve the same purpose as many other investment products: hedging and speculation and people use them for both. Hedging and speculating are neither bad nor good but are instead suitable or unsuitable based on the knowledge and tolerance for the end user. This is no different than other products.

If someone speculates with an option, they take on the added element of being wrong by a day causing the entire bet to go to zero -- meaning the catalyst doesn't occur until one day after expiration.

If someone speculates with a margin account they take on the element of being too leveraged into a massive and fast decline resulting in negative equity. This means after selling you out like a margin call, you owe the brokerage firm more money.

The levered and inverse fund may be of no use to you at all, but does that mean they should not exist? The only ones that should not exist are the ones that are not of any use to anyone. Whether or not the warnings that get slapped on them need to be toughened or people should fill out some sort of options paperwork is a different conversation entirely than what purpose do they serve and should they be abolished.

There is far more leverage with options and futures contracts but for some reason there are not calls to eliminate them.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,001.22 +18.63 0.11%
S&P 500 1,979.73 +0.82 0.04%
NASDAQ 4,460.2160 +15.3070 0.34%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs