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You don’t have to trade every day to make above average returns in the market. Patience is the key to any good strategy. For typical ETFs that track broader indexes, watch the management fees when considering a fund. The Fed will continue to provide distractions throughout 2016 with constant assessment and analyses of when they will raise again and what that means for the economy. Welcome to the ETFs section of Seeking Alpha’s Positioning for 2016 series! This year we have once again asked experts on a range of different asset classes and investing strategies to offer their vision for the coming year and beyond. As always, the focus is on an overall approach to portfolio construction. Nathan Buehler has been an author on Seeking Alpha since May 2014, specializing in the coverage of ETFs and volatility investments. In addition to writing on Seeking Alpha, he works full time as a Teacher in the Lee County School District, volunteers as his communities HOA President, and participates in local government. Most of his strategy is geared towards long term outlook with focuses on short term events or situations that create attractive opportunities. Seeking Alpha’s Carolyn Pairitz recently spoke with Nathan to find out what he is expecting from ETFs in 2016. Carolyn Pairitz ((CP)): While you cover a number of ETF topics, the VIX has been your focus on Seeking Alpha. What drew you to study and invest in volatility? Nathan Buehler (NB): I started investing in penny stocks when I was a teenager. I had no idea what I was doing and lost most of the money I invested. I didn’t give up and was always looking for ways to get rich quick. Getting rich quick also led to additional losses. As I grew up and matured I began to realize there was an opportunity to make money off of people that were either looking to get rich quick or panicking. I started researching volatility as an asset class and began practicing with options strategies and trying to learn everything I could about how volatility behaves relative to the market. Eventually I fine-tuned my knowledge of the VIX to the point I felt comfortable trading it. I love investor psychology and I will often have different takes and points of view on the VIX than other seasoned investors. This again comes from the fact I am self-taught. I learn something new every day and use that to continuously improve upon my investment objectives. CP: Do you have any advice for readers considering ETFs for their portfolios in 2016? NB: For typical ETFs that track broader indexes, watch the management fees. There are a number of very low cost funds run by very reputable companies. For volatility ETFs my only advice is to fully educate yourself before trading these products. This is also true for many ETFs that track commodities and have very specific objectives. ETFs don’t always behave like a stock and can lead to serious losses if an investor is not properly prepared. CP: Going into 2015, which asset classes are you overweight? Which are you underweight? NB: In my general portfolio I have moved overweight in select oil companies. I believe this is a cyclical pattern and as long oil prices stay low, demand will keep increasing. Eventually economics will take over and the present fear factor will clear itself up. These are positions I plan on keeping for 5-10 years so even if oil takes another year to recover, I am fine with waiting. CP: The SEC recently proposed rules that could shake up the current structure of leveraged ETFs. Could you elaborate on this further and how it could affect the ETF market in 2016? NB: The ETF companies have been on top of this from the start and ProShares even contacted me directly in response to one of my articles that covered the topic. For right now it doesn’t appear that this rule will have a real effect on any of the 2x leverage ETFs. However, many if not all 3x leverage products could be forced to close. I am not a fan of 3x leverage products and I feel this is the right decision to protect investors from themselves. At some point it is wrong to let people purchase a product that could wipe out their entire net worth in one day. Gambling is still legal if someone wants to bet it all on black. CP: With the Fed having raised fund rates this December, are you updating you VIX strategy or do you feel this change was already priced into the market? NB: I felt that the rise in rates was long overdue and well expected by the market. I was hoping for a hold which would have created an excellent opportunity for a sharp increase in volatility. The Fed will continue to provide distractions throughout 2016 with constant assessment and analyses of when they will raise again and what that means for the economy. To me, the Fed is just a bunch of noise. They get people hopped up and will calm the markets down. They have been a good tool in respects to volatility. CP: Are there any global issues on the horizon that ETF investors should pay particular attention to? NB: Geopolitical events always provide good opportunities for volatility. Two years ago Russia was providing regular spikes in volatility. The world loves a villain. We make movies about them and the super heroes that save us. Russia and China used to be those villains in regards to the stock market. Investors loved to gawk over what Russia was doing, who they were invading, and how China’s economy was collapsing. Now we have ISIS. Friends and foes alike have come together to take on ISIS. As far as I am concerned, this is a negative for volatility, a positive for the market, and a win for humanity. CP: As a teacher and an author on Seeking Alpha, do you have any advice for readers who work a full time job but also want to be involved in the markets? NB: There have been multiple studies out on how teachers make the best investors. Each of these studies cited one fact consistently, lack of trading. You don’t have to trade every day to make above average returns in the market. I constantly get questions on timing the market, when to get in, when to get out, etc. Investors need to chill out. My goal is to make a 15% return during the calendar year. Not 15% in January and then try for 80% by December. Patience is the key to any good strategy and if you are glued to your monitor all day watching the ticks of the market it isn’t healthy. I would conclude that a full time job gives you proper time to analyze the markets in the evenings and make more rational decisions by the next trading day. Scalper1 News
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