Trade short term mutual funds instead of stocks and options?

Question

Given the current market volatility-would'nt it be more profitable to trade short term, no fee, mtual funds as opposed to stocks and options for steady income? Mutual funds that allow you to go in and out every 30 days without penalties. There are lots of them and the markets keep going down.

Answer 1

If you want to do this, & if you can find mutual funds that will let you WHY NOT?? However if your maket timing skills are so great, I tend to wonder why you are not doing this already with ETFs??

Market timing is very tricky business. You have to be right twice. You have to know when to get in & then when to get back out again. If you wait for the market to go down, and then get out, all you are doing is locking in your losses. Then you wait for the market to go up for a few days, and then get in. Now you've missed out on a few days gains.

Market timers increase their risk, while lowering their returns. It is really the worst of both worlds.

Personally I would rather take advantage of a down market, and buy my mutual funds and/or stocks at a discount.

Answer 2

Not necessarily. Mutual funds can be a good alternative to individual stocks in many circumstances. However, what advantage do you see that gives them an advantage during volatile markets?

Since funds usually include many companies, they are more likely to move in tandem with the overall market unless you're in some highly specialized niche fund. A well-chosen stock may decline less or even go up when the market is going down. For example, I own an oil drilling stock that is up 60% since March. Oil prices have been going up and earnings are strong, so the stock has gone up even as the overall market seesaws up and down.

You can also buy put options on stocks that you think will go down. You can't do that with a fund except for a few specialized "bear market" funds.

Funds actually come with one big disadvantage if you're trying to play volatility (which I don't recommend, by the way - most people who try to time the markets get burned). Funds are normally priced only once a day. Prices of stocks and options change continuously all day depending on demand for them.

Answer 3

Hedge funds, as opposed to mutual funds, are lightly (almost not) regulated by the SEC. A hedge fund must have fewer than 100 investors and each investor must have net worth of $5,000,000 to be exempt from SEC regulations. This means hedge funds can pursue any and sometimes more risky and profitable trading/investment strategies and are not required to disclose information about investments and finances to investors. The trading strategies are quite complex but essentially involve exploiting opportunities to buy low and sell high. A short seller attempts to profit from the decline of a stock by selling a stock high and buying it low. The investor borrows a stock, sells it, buys it back and returns it to the owner, and keeps the difference. Losses from short selling can be, theoretically, unlimited because the price of the stock can go up forever. On the other hand, profits from short selling are theoretically limited because the price of the stock can only go down to zero.

Answer 4

Rydex, ProFunds, Direxion are 3 mutual fund families with no short term trading fee. For those working in financial service industry with typical holding period requirements of 30 days for ETF, these are best options for trading.

Answer 5

In my opinion, buying mutual funds is not the best idea, because 80% of them dont even beat the S&P 500...

**Listen, do a little research on your own, a invest your protfolio in 3 to 5 different stocks and see them rise...I currently have in my portfolio MCO, CHS, EPEX, and MOT

Good luck!