How can I invest in FTSE250

bowlhead99

andy112233 wrote: »

I am not sure what you call it, I invest in a 250 ETF when it has fallen, and when it rises (may be more than a few days) I sell, when it dips again I buy, if it rises significantly over the day then I will sell. So I can sell within the day, but if I am down then I am happy to hold on to it for longer periods.

This gives me a quick profit when the 250 had risen, and if it does not then I am ok with leaving my money in there as I think the 250 will always rise albeit over a longer period of time. I don't know if this is a good way to invest but it seems a safe way to me as any?

If you had adopted that tactic and bought the 250 ETF/tracker at the end of May 2007, it would have gone down a bit, and then after waiting for a while for it to show profit, you would have to wait a little while longer, and a little while longer, and longer, and then it is November 2008 and your loss is over 50%.

By mid March 2009, still 50% down, it would eventually have started to go up again. Once it had gone up a bit from there, to maybe only a 40% loss, you would probably have sold out, because although you were determined not to take the 50% loss, you would have learned your lesson and sure as heck didn't want to hang around to lose half of it again.



You are right that the FTSE 250 will always rise given enough time, and if it doesn't and everything has gone bust, the world will be in such a state that you will have other things on your mind and really won't be concerned about losing a few quid on your investment.

If you believe that FTSE 250 will always go up in the long term, why would you stop after a day and take it out, and be faced with perhaps having to pay more to buy back in? Leave it in for the long term and find something else to waste your time and money on, instead of trying to time the random walks of a stock market chart.

andy112233

If you believe that FTSE 250 will always go up in the long term, why would you stop after a day and take it out, and be faced with perhaps having to pay more to buy back in? Leave it in for the long term and find something else to waste your time and money on, instead of trying to time the random walks of a stock market chart.

When you use that approach there is no real counter other than I quite enjoy 'dabbling' !

brendon

andy112233 wrote: »

Thanks, I suspected that you cannot invest direct into the FTSE250

You can't invest in any index "directly". You can of course buy the constituent companies, but it's quite expensive in transaction fees, and to rebalance frequently. That's why we use funds, that pool everybody's money together. The FTSE 250 is no different to the FTSE 100 -- you can't "invest directly in the FTSE 100" either.

EdGasket

masonic wrote: »

The price of an ETF will only update when someone trades it.

Untrue; if it were you'd get arbitrage.

masonic

brendon wrote: »

You can't invest in any index "directly". You can of course buy the constituent companies, but it's quite expensive in transaction fees, and to rebalance frequently. That's why we use funds, that pool everybody's money together. The FTSE 250 is no different to the FTSE 100 -- you can't "invest directly in the FTSE 100" either.

If you invest in all of the companies making up an index by market cap, then no rebalancing is required. You would need to sell any that dropped out of the index and buy any they entered it, but that would be all. Share price movements do the rest of the work.

masonic

EdGasket wrote: »

Untrue; if it were you'd get arbitrage.

Ok, please educate me... How does the price change when no trades are taking place?

Edit: nevermind, I educated myself. As I stated, the market price of an ETF is determined by trades. ETF arbitrage does happen and in fact is a mechanism for bringing the market price back in line with NAV.

http://www.investopedia.com/articles/investing/032615/how-etf-arbitrage-works.asp

EdGasket

Listen; ETF's price can and does change with no trades. Shares are marked up on good news with no trades. I have streaming prices and streaming trades and I can tell you that ETF prices change with no trades. Fact.

masonic

EdGasket wrote: »

Listen; ETF's price can and does change with no trades. Shares are marked up on good news with no trades. I have streaming prices and streaming trades and I can tell you that ETF prices change with no trades. Fact.

Stating "Fact" is not going to be sufficient to convince me. The price will be determined by matching buy and sell orders. If there are no orders that can be matched, then the resultant price would be an estimate. Perhaps some streaming prices will update in relation to live bid and offer quotes.

The OP was complaining that some ETFs have "long periods (hour or so) where the value does not seem to move at all despite there being movement" in the index. Are you saying this is not possible, or that lack of trades is insufficient to cause this behaviour? If the latter, what does cause it?

EdGasket

http://www.investopedia.com/terms/g/gap.asp

"A gap is a break between prices on a chart that occurs when the price of a stock makes a sharp move up or down with no trading occurring in between. Gaps can be created by factors such as regular buying or selling pressure, earnings announcements, a change in an analyst's outlook or any other type of news release."

Do you think after the shock Brexit result, FTSE 250 ETF's traded that morning at the same price they closed at the previous night when 'Remain' looked a foregone conclusion waiting for people to make sales before moving the price down? Of course not; the price was marked down from the open.

PS I don't know why the OP suggests the FTSE 250 ETF's don't track the index; perhaps they can explain. Maybe the OP does not have a relaible price feed; sometimes the prices on feeds are not that good and you have to go to the market to get a real quote; maybe the OPs prices were lagging by 15 mins if they were free ones. In my experience the ETF's track very well unless you want to split hairs. Other reasons an ETF might not track exactly are:
1) It's TER (charges)
2) It's constituents might not exactly match the 250's but will usually be close enough for most people.

masonic

EdGasket wrote: »

http://www.investopedia.com/terms/g/gap.asp

"A gap is a break between prices on a chart that occurs when the price of a stock makes a sharp move up or down with no trading occurring in between. Gaps can be created by factors such as regular buying or selling pressure, earnings announcements, a change in an analyst's outlook or any other type of news release."

There was no trading in between and also no price in between (hence "a break between prices"). The lack of price during the gap is just as evident as the lack of trading. There cannot be a gap if there was not an equivalent period of time without a price. That period of time could be short or long. From my limited understanding of such matters, this can happen when a share goes into auction, for example, as well as when markets are closed. Prices can also move rapidly without there being a gap.

A gap is quite different than what was being discussed above, namely, the price staying static for long periods. In contrast, a gap is created when the price moves significantly between one trade and the next, usually at either side of a period when trading is suspended. As mentioned above, I'm more interested in the explanation for why the share price of some ETFs stays static even though the index it tracks is moving - lack of trading seemed a reasonable explanation to me.