Exchange-Traded Funds, or ETFs, combine many of the benefits of an index mutual fund with the flexibility of stocks. Like mutual funds, ETFs enable you to invest in a pool of securities in one transaction. And similar to stocks, ETFs offer stock-like trading features enabling you to trade throughout the day, purchase on margin, use stop and limit orders and even short-sell.

Exchange-traded funds have many strengths, but individual investors should be wary of investing in small amounts. Transaction fees cannot be avoided with an ETF, as they can by going directly to a Rydex fund, because ETFs must be bought and sold like a stock through a brokerage house. For substantial purchases, this transaction fee is an insignificant percentage, but for small purchases it becomes significant. ETF's may not be suited for the FMS daily small gain approach.

Further, an ETF (from a psychology perspective) can give some traders too much control. It has been said that for most people money is not the goal of investing. It is the means to the end or a currency that buys emotional states like, feeling secure, feeling proud or feeling liberated. In fact seldom are market traders trading on the statistically most probable outcome, but rather on market directions that fill an emotional need. Too often market traders choose the bottom of a market to sell their positions because of how the trade is making them feel (i.e. "if the market continues down I will feel more of this"), only to then watch as the position rebounds to a profitable position. Unless you are a seasoned trader ETF's are a bad idea.

FMS does not use ETF's because they allow traders to circumvent the most statistically likely outcome in favor of an emotion. The reason for using a quantitative analysis forecasting system to begin with is to remove the emotion from your trading in favor of sound mathematics. The Rydex funds that the FMS trade group uses, forces longer trades (market close) and therefore larger gains, (because of the historical accuracy).

The FMS Daily Forecast is available free to investors and market traders. The forecasts allow investors to take profits in rising and falling markets making it an ideal market neutral strategy. To subscribe to the Forecast Market Software daily forecast, Click Here.

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