Pat McKeough, Author at Financial Independence Hub

To determine when to buy an ETF, some investors use technical analysis and other tools. But you need to dig deeper.

Investors often wonder: what is a good entry point when purchasing a stock or an ETF?

The first question before asking when to buy an ETF is whether an exchange traded fund investment is right for your portfolio. An ETF investment is one of the most popular and most benign investing innovations of our time. ETF investments are a little like conventional mutual funds, but with two key differences.

First, ETF investments trade on a stock exchange throughout the day, much like ordinary stocks. So you can buy them through a broker whenever the stock market is open, and generally you pay the same commission rate that you pay to buy stocks. In contrast, you can only buy most conventional mutual funds at the end of the day. What’s more, commissions vary widely, depending on negotiations with your broker or fund dealer.

Second, the MER (Management Expense Ratio) is generally much lower on ETFs than on conventional mutual funds. That’s because most ETFs take a much simpler approach to investing. Instead of actively managing clients’ investments, ETF providers invest so as to mirror the holdings and performance of a particular stock-market index.

ETFs practice this “passive” fund management, in contrast to the “active” management that conventional mutual funds provide at much higher costs. Traditional ETFs stick with this passive management—they follow the lead of the sponsor of the index (for example, Standard & Poors). Sponsors of stock indexes do from time to time change the stocks that make up the index, but generally only when the market weighting of stocks change. They don’t attempt to pick and choose which stocks they think have the best prospects.

This traditional, passive style also keeps turnover very low, and that in turn keeps trading costs for your ETF investment down.

When to buy an ETF

Canadian marijuana stocks offer some speculative appeal — but here’s why we think you should avoid them

As you probably know, several U.S. states have decriminalized or legalized marijuana use and have begun authorizing legal production and sale of the plant. In Canada, marijuana has been legal for medical use for some time, and we are occasionally asked about Canadian marijuana stocks.

This change in the law is bound to lead to a shift in current and future marijuana production, from the underground economy to the legal economy, where it can be regulated, taxed and invested in. Tax revenues are already starting to roll in, but we haven’t found any Canadian marijuana stocks worthy of investment. So far, most of what we’ve seen are stock promotions.

We advise staying out of stock promotions of Canadian marijuana stocks businesses or anything else. They attract the wrong kind of people. Stock promotion is a take-the-money-and-run type of business. Most successful entrepreneurs value their reputations, and want to build a profitable, sustainable business that can pay off for investors. So they generally go into some other line of work, and stay out of stock promotion.

These days, it’s faster and easier than ever to launch a stock promotion, thanks to the Internet. One recent “penny pot” stock scam almost seems like an MBA-style case study on how to launch one of these frauds online.

We won’t name the penny stock company that is the subject of the promotion campaign, since it claims it’s not involved in the fraud. Let’s just refer to it as “Pot o’ Gold,” or POG for short.

The POG spam emails we’ve seen use the following techniques: