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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75340  
Subject: Re: Advice Date: 2/10/2012 10:01 AM
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IWM is an ETF (Exchange Traded Fund) that matches (so far as possible) the Russell 2000, which is an index that represents the small cap stocks.

An Exchange Traded Fund is a mutual fund that trades like a stock, and can be bought and sold any time the market is open. The number of shares may vary - they can be created and destroyed. Open-ended mutual funds only trade at end-of-day prices, and may or may not try to match an index. They issue and redeem shares, so the number of shares outstanding will vary. Closed ended mutual funds also trade like stocks, but there is only a fixed number of shares (although they can, at times, issue new shares just as stocks may).

Other index ETFs are QQQ, which matches the Nasdaq 100, SPY, which matches the S&P 500, DIA, which matches the Dow Industrials. There are also sector ETFs as well, which match some sector, e. g. Biotec. Then there are inverse ETFs which go up when the index goes down, and leveraged ETFs which try to move up and down 2 times the underlying index.

So there is always something you can do to make money in the market, and this fact is a source of joy or frustration to most people.

Go to http://www.google.com and search on Exchanges Traded Funds, mutual funds, etc. for more detail.

In general (although nothing like this is 100% true) when the market is in rally mode (moving up), the small caps out-perform the large caps. So timing and trading IWM will, in general, be more profitable than timing something like SPY.

The advantage of ETFs and closed-ended funds is that you can trade them freely. If you buy an open ended mutual fund, the manager expects you to hold it for some time, and may ban you from the fund if you sell in anticipation of the fund's decline, or just because you found a better fund. The fund manager obviously would rather get his fee on a declining balance than no fee at all, so they make high minded statements about the evils of "market timing" which are silly and self serving.

I think it is important to study technical analysis if you want to make money in the stock market. I use Fasttrack for this, but there are other products.
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