diamond & gem ETF

[gongli]

A new exchange-traded fund that tracks diamonds and gems. Probably might offer some diversification in a portfolio. Someone with a lot of value in stones might short this fund to help protect the collection's value against possible overall drops in gem prices.

http://www.nationaljeweler.com/nj/diamonds/a/~29624-New-ETF-tracking-diamond-gem

 

[kenny]

A new exchange-traded fund that tracks diamonds and gems. Probably might offer some diversification in a portfolio. Someone with a lot of value in stones might short this fund to help protect the collection's value against possible overall drops in gem prices.

http://www.nationaljeweler.com/nj/diamonds/a/~29624-New-ETF-tracking-diamond-gem

Using that reasoning, it would also protect them from overall increases in gem prices.

 

[JewelFreak]

Like any fund, lows are not as low as a single stock might go, nor highs as high. Stability is the goal. Positive that it has companies from mining all the way to retail, but I'd want to do more research before buying -- such as who is managing & his or her record in the past. I'd also wait to see how it performs for a year or 2. It would be a lot more fun than buying, say, timber funds.

--- Laurie

 

[gongli]

Using that reasoning, it would also protect them from overall increases in gem prices.

Very true. This type of shorting is used, for example, by stock pickers who believe their particular stocks will outperform the overall market, but they're not sure whether the overall market will go up or down. If the overall market tanks, generally all stocks tank, and so then even though they think their stocks will outperform, they'll still be down. So they short the overall market, which as you noted forces them to give up some of their upside from the overall market, but protects them from a downturn.

It increases the gain (or loss) from their "skill" in picking the particular stocks, and reduces gains or losses (exposure) from the overall market.