Majority of people are coming to the stock market without knowing anything how the market works. All they usually know is that you may invest into stock. They start to look for good stocks and very soon they become frustrated – they start to understand that in order to select a few good stocks they are required to go through hundred of stocks, compare their performance, their reports, study fundamentals, etc.

When I ask some of my friends-traders about ETFs (Exchange Traded Funds) I hear the standard answer that they became familiar with stocks and they prefer to trade stocks. My second question usually is about how he/she does analysis to see what to trade and where to trade (long or short). Now comes interesting part. I would spread their stock analysis in several steps.

Step 1: Spend 1-2 month going through hundreds of stocks from different industries. As a rule, this stage of analysis includes going through earnings and other reports, comparing stock’s performance, analyzing the market sector the stocks belongs to, etc. All this ends with selection of 2-10 stocks that a trader became familiar with and considers that they are good for investments.

Step2: Subscribe to the reports, charts, quotes that cover selected stocks and could be used for further analysis on regular basis.

Step 3: Start to trade by analyzing the selected stocks on the regular basis (doing fundamental and technical analysis). In addition a stock trader continues to analyze selected industry and the whole market – you need to know where the industry and market are going do not to lose the stocks.

Doesn’t it look complicated? Especially when it comes to the fundamental analysis of all the reports… People are learning in the universities how to correctly analyze and evaluate a public company. Do you think an “average Joe” has time and is able to learn all the aspects of the fundamentals and apply it on practice? I am sorry for being sarcastic, yet, I am a little bit skeptical about retail traders (including me) and their abilities to perform liable fundamental analysis of stock. Maybe you can skip fundamentals if you are day trader and trade stocks in short-term, however if you are investing your pension for longer-term you have to do fundamentals – otherwise it is not an investment but a gambling.

So, what is the solution? For me, I trade Exchange Traded Funds. There are plenty of very active ETFs: QQQQ, SPY, DIA, XLF, IWM, etc. The biggest advantage of ETF is that I do not have to do fundamental analysis – no complicated and time consuming job – all fundamentals are done by professionals who manage indexes that are tracked by ETFs. All I do is the technical analysis of indexes I trade. Index analysis is a stock, industry and market analysis at the same time. For instance when I analyze S&P 500 index, the result of the analysis could be applied to trade SPY stock (S&P 500 index tracking stock). At the same time S&P 500 is considered as a barometer of the US stock market and S&P 500 index analysis reflects sentiment on US stock market. So, tell my why should I not to trade SPY, QQQQ and other ETFs and why should I go into complicated stock analysis.

Charts, quotes, technical analysis, signals for indexes and exchanges (S&P 500, Nasdaq 100, DJI, etc) are essential in trading index derivatives (QQQQ, SPY, DIA, etc), index emini futures and index tracking funds.

Investors can get such precious metals funds by checking out the entire list of the Zacks #1 Rank Precious Metals Equity Funds.

5 fantastic Examples of Precious Metals

US Global Investors World Precious Minerals (UNWPX) seeks long-term capital appreciation. It also aims to provide protection against inflation and monetary instability. It was incepted in November 1985.

Instead of directly investing in precious metals fund invests a greater part of its assets, at least 80%, in firms principally engaged in the exploration, mining and processing of these metals. This precious metals fund focuses on selecting junior and intermediate exploration companies from around the globe.

Shareholders have to make a minimum initial investment of $5,000 to enter this Zacks #1 Rank (“Strong Buy”) fund. The precious metals fund has an expense ratio of 1.50% against a category average of 1.47%.

Frank E. Holmes has been lead manager of the fund since June 1999. Holmes was formerly President of the Toronto Society of the Investment Dealers Association and is CEO and Chief Investment Officer of U.S. Global Investors, Inc.

Franklin Gold & Precious Metals A (FKRCX) seeks long-term capital appreciation. It was incepted in May 1969.

At least 80% of the net assets of this precious metals fund are invested in gold and precious metals operation companies. This precious metals fund also aims to produce current income from dividends or interest received from its investments.

This precious metals fund has an expense ratio of 1.01 % against a category average of 1.47%. As of July 2009, it has a portfolio turnover of 17%.

Steve Land has been lead manager of this precious metals fund since April 1999. Land is a Chartered Financial Analyst and has been with Franklin Templeton Investments since 1997.

Van Eck International Investors Gold A (INIVX) seeks long-term capital appreciation by investing in common stocks of gold mining companies. The fund may take current income into consideration in picking investments. It was incepted in January 1956.

This precious metals fund does not directly invest in gold or bullion, but invests in securities of companies principally engaged in gold-related activities, as well as in instruments that derive their value from gold. A company must derive at least 50% of its revenues from gold-related activities to be considered for investment purposes.

The precious metals fund has an expense ratio of 1.44% against a category average of 1.47%. As of June 2009, it has a portfolio turnover of 14%.

Joseph M. Foster has been lead manager of the fund since July 1998. Foster joined Van Eck Associates Corporation in 1996 and is a portfolio manager with the firm.

USAA Precious Metals and Minerals (USAGX) seeks to achieve long-term capital appreciation and provide protection of the invested capital against inflation. Providing current income to investors is a secondary objective. It was incepted in August 1984.

This precious metals fund doesn’t invest in gold directly, but in gold mining and other precious metals and mineral mining companies, with at least 80% of its assets invested in such firms. With the right mix of companies, the fund can benefit disproportionately when underlying commodity prices rise, while avoid the worst losses of commodity-price downturns.

Shareholders have to make a minimum initial investment of $3,000 to enter this Zacks #1 Rank (“Strong Buy”) fund. It has an expense ratio of 2.50% against a category average of 1.47%.

Mark W. Johnson has been lead manager of this precious metals fund since January 1994. Johnson is a Chartered Financial Analyst and is executive director of equity investments with USAA Investment Management Company.

Midas Fund (MIDSX) was incepted in January 1986. The precious metals fund seeks capital appreciation and protection against inflation and, secondarily, current income.

This precious metals fund invests at least 65% of its assets in companies which are directly or indirectly involved in the business of mining, and processing precious metals such as gold, silver and platinum. It may invest up to 35% of its assets in selected growth companies.

The precious metals fund has an expense ratio of 2.43% against a category average of 1.47%. As of September 2009, it has a portfolio turnover of 62%.

Thomas B. Winmill has been lead manager of the fund since January 2002. Winmill has been president of Midas funds since 1995 and the distributor since 1991.

Discover Many More Funds

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By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward.

Top Precious Metals Equity Funds