- Exchange-traded funds may seem boring, but they are sophisticated financial instruments that allow you to invest in almost anything.
- Today, Nicholas Vardy explains why you may be underestimating the potential of ETFs.
Exchange-traded funds (ETFs) have a boring reputation, even among the most sophisticated investors.
Many still believe that ETFs are simply newfangled replacements for conservative mutual funds.
This could not be further from the truth.
My role as ETF Strategist for Liberty Through Wealth and The Oxford Club is to educate you about all that ETFs can really do.
The essence of my message is this: ETFs are sophisticated financial instruments that allow you to invest in almost anything, anywhere, over any period of time – as easily as you can invest in a stock.
ETFs allow you to speculate against the S&P 500, place a triple-leveraged bet on U.S. tech stocks, and even invest in a “set it and forget it” conservative income strategy like the Dividend Aristocrats, all at the click of a mouse.
Today, I want to illustrate the flexibility of ETFs by taking you through a pair of trades I recommended recently in my Oxford Wealth Accelerator trading service that generated back-to-back 30% gains by betting on the unlikely revival of the cryptocurrency bitcoin.
Bitcoin Trade No. 1
Now, truth be told, I am not an expert on cryptocurrencies. In fact, you can even call me a crypto skeptic.
So when I looked at the “Money Matrix” – my proprietary system for tracking thousands of ETFs – on May 8, I was surprised to find a buy recommendation for the Grayscale Bitcoin Trust (OTC: GBTC).
Now, I know that fortunes have been made – and lost – betting on crypto over the past two years.
I also know that after reaching a peak of just under $20,000 in December 2017, the price of bitcoin collapsed more than 80%, closing 2018 at $3,747.
Yet as investors have focused on Fed policy and the U.S. trade war with China, bitcoin has been staging a quiet comeback.
It has even crossed back over the psychologically crucial price level of $6,000.
So, much to the surprise of my staff at The Oxford Club, I recommended the Grayscale Bitcoin Trust to Oxford Wealth Accelerator subscribers.
Now, I’m not smart enough to put a fundamental value on bitcoin. But my recommendation to buy the Grayscale Bitcoin Trust was based purely on the Money Matrix’s technical measures of momentum.
The trade worked out exceptionally well. Within a week, the Grayscale Bitcoin Trust had soared well beyond 35%.
And by exiting at our adjusted stop, my subscribers locked in their biggest ever Oxford Wealth Accelerator gain of 30% – in just five trading days.
Bitcoin Trade No. 2
Little did I realize at the time… we weren’t yet done with bitcoin.
Two weeks later, on May 29, the Grayscale Bitcoin Trust popped up as a “Buy” on my Money Matrix again.
With bitcoin trading at roughly $8,500 at the time, speculators now had $10,000 in their sights. And with bitcoin still more than 50% off its record high of almost $20,000, it seemed like there was plenty of upside left.
Fast-forward to June 26, and the Grayscale Bitcoin Trust closed the day with a gain of 47.6%.
Then the bottom dropped out of the market.
Bitcoin soared to almost $14,000 overnight. It then collapsed more than $1,700 in a half-hour – and continued to tumble well below $12,000.
On June 27, the Grayscale Bitcoin Trust opened near our tightened stop, and we exited with another gain of about 30%.
It was a wild ride indeed…
But Oxford Wealth Accelerator subscribers locked in two 30% gains in less than two months.
Lessons Learned
I am sharing the details of these two trades so I can convey three critical lessons about ETF investing:
- ETFs allow you to invest in – and profit from – literally anything, even exotic new asset classes like bitcoin.
- Risk management – or adjusting your stops to lock in gains – is an essential part of speculation. It is even more critical for volatile positions like bitcoin or, say, triple-leveraged ETFs. As the Grayscale Bitcoin Trust example shows, gains can evaporate literally overnight.
- I am ready to embrace all the opportunities the market offers. The bitcoin boom may not be over. This double play could quickly turn into a triple play or more over the coming weeks.
Together, these lessons highlight the remarkable flexibility of ETFs – as well as the philosophy behind Oxford Wealth Accelerator.
In sum, Oxford Wealth Accelerator allows you to…
- Speculate on high-risk, high-return investment ideas that include bets on exotic asset classes and cryptocurrencies like bitcoin through the Tactical Portfolio
- Assemble a portfolio of investment strategies that have long-term track records of outpacing the S&P 500 with the Strategic Portfolio
- Invest in a high-yield income portfolio that more than triples the current 1.9% yield of the U.S. stock market through the upcoming Income Portfolio.
ETFs may not be able to do everything.
But they come pretty darn close.
Good investing,
Nicholas