FREQUENTLY ASKED QUESTIONS - if your question is not answered below, please leave a comment by clicking here.
Q - Do you use SPYmaster to trade your own account? A - Absolutely! I have an IRA that uses SPYmaster, and I use its signals in overall market analysis to get a fine tuned feel for what is likely to happen.
Q - I don't want to use a black box approach exclusively. Why should I subscribe?
A - Because SPYmaster has an excellent record. If you don't want to use it alone, you can use it to keep you on your toes and to confirm or question your own market judgments.
Q - Exactly what is SPY?
A - SPY is the stock exchange's ticker symbol for the SPDR Trust.
Taken from the prospectus: "The Trust is a unit investment trust organized in the United States
(“US”), a single fund that issues securities called Standard & Poor’s
Depositary Receipts or “SPDRs”, which represent an undivided ownership interest
in the portfolio of stocks held by the Trust. SPDRs intend to provide investment
results that, before expenses, generally correspond to the price and yield
performance of the Standard and Poor’s 500 Composite Stock Price Index ® (“S&P 500 Index”).
The Trust’s portfolio consists of substantially all of the component common
stocks which comprise the S&P 500 Index and are weighted in accordance with
the terms of the Trust Agreement. For additional details
regarding the Trust’s portfolio, please consult pages 41-46 in the US Prospectus.
All SPDRs are denominated in US dollars."
Q - I'm concerned about liquidity. Is SPY large?
A - As at September 15, 2009 SPY had 715.6 million shares outstanding with a market capitalization of $76 Billion, making it one of if not the largest of the exchange traded funds.
Q - Is it easily traded?
A - Yes, for both small and large investors. As of mid September 2009 its average daily trading volume was 180.9 Million shares or roughly $18 Billion a day.
Q - Why would anyone invest in SPY?
A - Several reasons:
First, SPY represents a holding of many of the largest and most successful U.S. companies; the S&P 500 is often used as a reference for the "market" as a whole.
Second, an investment in SPY gives gives one broad diversification, a key tenet for reducing investment risk.
Third, one can gain the benefits of the first two reasons by trading just this one stock which can be done these days at very low commission rates; so no question why it is a major holding in many portfolios.
Q- Why trade SPY? Why not hold it for the long term?
A - Well, if you look at the table on the home page you will see that since 1996 the S&P has produced a compound annual return (before dividends) of just 2.5%. That's far less than the inflation rate over that period. Yes, dividends do amount to something and are important, but for many of us they and the bought and held return are not enough.
Furthermore, even though the market is down from its all-time highs and recovering, here in mid 2009, serious questions remain about the U.S. economy's ability to recover to anywhere near where it was several years ago.
Another concern driving us to look for higher returns results from the stimulus program's massive infusions of money and credit. That may well trigger a significant decline in the real world purchasing power of the U.S. dollar. This has driven us again to look at other currencies, foreign investments, and precious metals. There are significant risks associated with those investments which some people do not want to entertain.....and there is significant potential in trading the U.S. stock market with a proven discipline such as SPYmaster. While we have hopes that in the very long run the United States will get its act back together, it will take a lot of time, mindset change and sacrifice to do it.
One solution to keeping ones' wealth in the interim is to try to earn a higher return than the bought and held U.S. stockmarket has allowed. SPYmaster's trading program has worked well to do that.
Commission rates being as low as they are and with much money today tied up in 401k plans and IRAs which do not incur taxes until the funds are withdrawn, trading with a discipline like SPYmaster may be the best way to try to get that extra return.
Q - I've heard that day trading is a very risky full time job. Is this day trading?
A - No. Day trading usually involves closing out any positions at the end of a trading day, and it is usually done on margin with borrowed money which is what makes it really risky. We have not used margin or borrowed money here.
During our 13 year study, the average holding period of a SPYmaster position was 7 trading days, the shortest was one day and the longest, 23 days. It is not buy and hold, but it is definitely not day trading. You can get a better feel for this from the "year-to-date" detailed results page which shows the date of each trade this year.
Q - I'm an investment professional. I note that your charts are produced on Metastock. Can I get the SPYmaster program on my computer so I can monitor things and get the signals as the day progresses?
A - Yes. It may be possible to license you to use the software. Please send an e-mail to info@etftrademaster.com
with your contact information.
Q - Isn't trading really speculation? I've heard that speculation is risky.
A - Yes, it is. But owning any common stock is risky. Have you ever known a person who buys a stock not hoping its price will go up? That thinking or hope alone is speculation. That it might go down is the risk. With SPYmaster's signals you can trade and make money in SPY when the S&P 500 (the market) goes up and when it goes down. SPY is not just one company. Because it represents an index, it spreads the risk over a broadly diversified list of quality companies. Because of this it has less volatility and certain other safeguards that owning an individual stock does not have and thus might be considered safer than owning one stock. This is one reason people have invested over $70 billion in SPY.
Q - I like the idea of selling short when the market goes down, but I can't sell short in my IRA or 401K plan.
A - No you can't. But you can use an inverted etf, such as SH in these accounts. SH is another etf established to move inversely to the S&P, i.e., go up when the S&P goes down. So it works like a short position in the S&P.
