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SPDR Gold Trust ETF Chart Analysis

September 20, 2011 By Leave a Comment

Year-to-date, the SPDR Gold Trust (GLD) has outperformed the SPDR S&P 500 ETF (SPY) by a margin of about 20,000 basis points. Over the last month of trading, however, GLD has lagged behind SPY, the funds gaining around -4% and +6%, respectively [see GLD Returns].

From a fundamental perspective, this divergence in short-term performance could suggest that investors have in fact regained some confidence and have gradually begun to re-allocate assets to riskier corners of the market [consider Three Alternate Safe Haven Currency ETFs].

One piece of evidence that goes against this hypothesis, however, is that U.S. Treasury funds, like TLT and IEF, have also worked their way higher alongside rising stocks.

In fact, these ETFs have even better held their ground during gold’s recent slump, perhaps suggesting that investors aren’t quite convinced of the recent rallies in equity markets given the consistently worse-than-expected economic data dominating Wall Street [consider the new Simple (But Effective) Safe Haven ETFdb Model Portfolio].

Filed Under: SPDR Tagged With: , ,

FTSE NAREIT Residential Index Fund for Your Next Real Estate ETF Investment

September 15, 2011 By Leave a Comment

Looking for a great real estate ETF investment? Do some research on the iShares FTSE NAREIT Residential Index Fund (NYSE:REZ). While some funds have outperformed others, none have done better that the FTSE NAREIT Residential Index Fund

While overall the sector may still be facing some headwinds, most funds in the Real Estate ETFdb Category have performed rather well so far in 2011 thanks to these outperforming sectors. In fact, over the 18 ETFs in the space, 13 have outperformed the S&P 500 in a year-to-date comparison, suggesting that the vast majority of products are giving investors a better performance from a capital gain perspective– not to mention yield– than a simple investment in the S&P 500.

REZ has managed to produce a 9.8% gain for investors so far in 2011, thoroughly trouncing the market and beating out far more popular funds as well. For example, the two most popular products in the space, (NYSE:VNQ) and (NYSE:IYR), are producing returns of 0.65% and -1.4%, respectively, on a year-to-date basis for their investors.

While both of these products do provide investors with slightly better yields than REZ, they obviously do not come close from a performance standpoint, either this year or from longer term periods as well. In fact, when looking at the previous three years, REZ is the top performer in the category, gaining 16.5% while VNQ gained slightly (up 1.6%), and IYR lost a bit (down 3.7%) in comparison.

Real estate ETFs are a fantastic way to invest your money. Even in the struggling housing market, if you know which ones to invest in, then you are definitely going to make some money. Here are 10 more real estate ETFs to keep an eye on.

Filed Under: iShares, Real Estate ETFs Tagged With: , ,

Gold ETFs Still a Good Investment, Even With Price Drop

September 14, 2011 By Leave a Comment

Gold recently saw a price drop, mostly because of the ongoing concerns in Europe, particularly Greece. However, gold ETFs are still a good investment, even with the current price drop.

Why? Simply put: because it is gold. Even with the price drop, investors are still continuing to scramble to get their money into gold, because gold provides a guaranteed safe haven for their money right now.

The price of gold is up 30 percent in just the last six months. That return looks all the more enticing at a time when investor fears are growing in the stock market, and there’s little to be made from U.S. Treasury’s or money-market funds. Basically, get your money in gold or other precious metal ETFs.

When to Buy

Excerpt taken from The Associated Press

The big question right now is when to jump in. As demonstrated in recent weeks, gold prices react very quickly to economic news.

“The pendulum swings one way on fearfulness and back the other way on complacency,” said Tom Winmill, portfolio manager of $105 million Midas Fund, which owns gold and stocks in gold miners.

Also affecting gold prices are purchases by the world’s central bankers. This amount more than quadrupled this April through June, compared with a year ago, according to the World Gold Council. That continued source of demand bodes well for sustaining gold’s value.

But looking at the purchase from a personal level, gold provides a hedge against inflation and it’s a reliable store of wealth since investors don’t have to worry about credit risk. It also adds diversification to a portfolio because its price doesn’t move in tandem with the stock and bond markets.

“It all makes the argument for establishment of a gold position as a core holding (in your portfolio),” Winmill said.

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How should you buy gold? Obviously most of us don’t have the option to just go buy gold bullion. However there are some alternatives. While a 1-troy ounce American Eagle gold coin may cost as much as $1,900, investors can get into a mutual fund or ETF for a fraction of that. That is why gold ETFs are still so valuable. They offer the chance to invest in gold without breaking the bank. The gold ETF’s total return year-to-date is 28.7 percent, compared with a 5.5 percent decline of the S&P 500 ETF (SPY).

Remember, always exercise caution and do your homework when it comes to investing in any sort of ETF. While gold ETFs are a good investment, you should still always know what you are getting into.

Filed Under: Precious Metals ETFs Tagged With: , ,

Make Money With Short ETFs in Tough Economical Markets

September 13, 2011 By Leave a Comment

Global stock markets continue to crumble around us. With the latest news  regarding the default situation in Greece things look even worse. However, there is still a way to make money with ETFs. Short ETFs are a great way to make money while we are stuck in tough economical markets.

Precious metals – particularly silver and gold, are doing well and will continue to do well. However, there are also the short exchange traded funds like SUK2 for the FTSE, or SE2P for the eurostoxx that many investors are making money off of. There are also many US equivalents to these short ETFs.

Short ETFs can capture and monetize a falling stock market for even the most humble investor with just a few dollars in a brokerage account. This is if you do your homework and pay your cards right.

If markets resume their upward trend then this is a bad strategy. But how likely is this? Goldman is in the dock. Greece is causing a European bond crisis. The UK election threatens a hung parliament with no leadership. The Chinese economy is overheating. The US housing market remains in a depression that will get worse if interest rates rise courtesy of the Greek crisis spreading.

Since the bad news is that the United States economy – and most other economies around the world, are in the toilet, and will continue to be for a while, then using short ETFs to make some money is a great way to put some extra cash in you pocket and a great way to allow you to keep investing, even in these tough economic markets.

Filed Under: Short ETFs, Wall Street News Tagged With: , , , ,

Will ETFs Suffer Based on What Happens in Greece?

September 12, 2011 By Leave a Comment

Many investors are wondering if ETFs will suffer badly based on the news that Greece is more than likely going to default. The best answer I can give is that ETFs will at least tumble some based on what happens in Greece, as will most everything else.

Single-country indexes on Monday in the region were suffering declines of 3%. Worries over Greece’s financial condition and the Eurozone debt crisis rippled through global markets. It seems the entire world is going to feel the burn if Greece defaults.

France’s CAC 40 declined 4.4% while Germany’s DAX fell 3.1%. ETFs tracking European stocks were falling to start the week after Friday’s rout. Why the major declines in these other countries? There is so much money tied up in Greece form other countries (including America) that if Greece defaults they are going to drag these other countries in a downward vortex with them. America has a ton of money tied up there, and many people will suffer hits on their retirement funds if Greece defaults.

The iShares Lehman 20+ Year Treasury Bond (NYSEArca: TLT – News) rose 0.7% as yields on the 10-year note traded under 1.9%. [Treasury ETFs Jump]

“The market is in extreme fear,” Charles Berry, a fixed- income trader at Landesbank Baden-Wuettemberg, told Bloomberg. “It’s the problem in the euro area that drove that sentiment.”

There are still some solid ETF investments, as real estate ETFs and Gold and Silver ETFs will more than likely remain strong and remain a good place to keep your money safe during these tough economic times.

Filed Under: Wall Street News Tagged With: , , ,

United States ETF Inflows Fell Sharply in August

September 8, 2011 By Leave a Comment

United States ETF inflows fell sharply in August as stock market volatility rose to its highest levels since the worst days of the global financial crisis in 2008. What does this mean?

Most investors pulled money from equity during the month of August, choosing commodity and real estate ETFs and headed for the relative safety of bonds. Fixed income ETFs gathered inflows of $4.7bn in August, compared with $2.6bn in July. According to Financial Times, a short maturity bond ETF was the second most popular choice for ETF investors in August with the SPDR BarCap 1-3 month bill ETF, known as BIL, attracting inflows of $2.1bn.

While United States inflows did fall, the sharp swings during the month have also served to re-ignite the debate over whether the growing popularity of ETFs could be contributing to an increase in stock market volatility.

Pundits, investors, academics and analysts have all suggested that the growth of ETFs and index funds has resulted in an “increased commonality of trading” where the simultaneously buying or selling of all of the constituents of an index forces them to move together during the trading day.

We will see what develops in September, but either way, ETFs remain a great way to build a very diversified portfolio, especially if you get invested in the right ones.

Filed Under: ETF Hound News Tagged With: , ,

ETFs Show Biggest Share of Stock-Market Volume on Record in August

September 7, 2011 By Leave a Comment

It looks like ETFs are taking over the world. At least that was the term many analyst and investors defaulted to when they looked at the share of stock market volume that ETFs held through August.

According to Birinyi Associates analyst Kevin Pleines 70 billion shares changed hands last month, an 86% increase from the previous month. In August, ETF trading accounted for 29% of all the US exchange volume.

Shares traded in SPY (S&P 500) rose 104%, FAS (financials) trading rose 200% and VXX (volatility) rose 119%. Volume in all leveraged ETFs rose 114% and accounted for 19% of all ETF shares traded in August.

The 86% increase in shares trading is a phenomenal stat, especially if you think about it from a month-to-month basis.

What ETF Performed the Best in August?

The ETF that performed the best last month was the TVIX, a leveraged ETF tracking the VIX, or CBOE volatility index. It jumped 135%. The worst performing ETF was the XIV, an inverse VIX tracker, which fell nearly 51%.

You may want to look into the TVIX ETF, as it looks like that one will continue to perform strong.

Filed Under: ETF General Information, ETF Hound News Tagged With: ,

Advantages of ETFs Over Mutual Funds

August 22, 2011 By Leave a Comment

Most investors still don’t know about Exchange Traded Funds (or ETFs) and their advantages over traditional mutual funds. Even many seasoned investors are still clamoring over which one to go with. Lets take a look at Exchange Traded Funds, their history, performance and advantages. This will give you a better understanding of how much better ETFs are than mutual funds

ETF 101: A Quick Look

Exchange Traded Funds can most accurately be described as the happy marriage of a stock with a mutual fund.

Like mutual funds, when an investor buys an ETF, he is buying a pool of securities at one time. For instance, an ETF known as DIA, or “Diamonds.” allows the investor to take a position in the Dow Jones Industrial Average.

Like a stock, an ETF can be purchased through a brokerage account, can be traded throughout the day, can be bought on margin and offers stock-like trading features such as limit orders, stop orders and short selling.

ETFs come in many different flavors. They track all the major indexes like the Dow, S&P 500, NASDAQ 100, Russell 2000 and others. They’re also available in a number of different sectors, many of which are hot at some point so it is your job to keep an eye out. Investors who want to trade sectors like energy, technology, precious metals, financial, health care, emerging markets, interest rates, real estate and many more have the ability to do this.

Introduced over 17 years ago, ETFs were initially mostly used by professional traders, but in recent years, have experienced rapid growth as a popular investment vehicle with public investors. Now everyone is trading them, including investors on all scales of the financial spectrum.

ETFs have gained such widespread acceptance and popularity because they provide significant advantages over mutual funds. The advantages of ETFs over mutual funds include:

  • Continuous pricing throughout the day compared to end-of-day pricing for mutual funds
  • Can be sold short like a stock, which isn’t possible with mutual funds
  • Can be bought on margin
  • Can use limit and stop orders so you can exit or enter during the trading day
  • Have lower expenses than mutual funds and no management fees

Adding it all up, it’s easy to see why Exchange Traded Funds have been growing at a rate of nearly 50% per year since 1993. This is pretty rapid growth, and will continue at a rate close to this for the foreseeable future.

Conclusion

It’s easy to see why Exchange Traded Funds have steadily grown in popularity over the last seventeen years. By combining the benefits of a mutual fund with the benefits of a stock, they really do offer investors an optimum combination of flexibility and potential profit.

Of course, the large mutual fund companies don’t like ETFs but have had to adjust to their new popularity and so many fund families have introduced ETFs of their own in recent years.

For investors, ETFs offer considerable advantages of flexibility, cost and diversity, and therefore, this makes them a clear choice over mutual funds. Do some research and get yourself invested in ETFs today!

Filed Under: ETF General Information, Investing Tips, What are ETFs Tagged With: , , ,

Five Benefits of Investing in ETFs

August 19, 2011 By Leave a Comment

ETFs usually come up pretty quickly when people ask for investing advice, because they are so heavily marketed and trumped by the industry. Exchange-traded funds, or ETFs, are an easy way to diversify a small investment, but to get the most out of your investment, it is important to understand how they operate.

ETFs are like mutual funds, in that they are a collection of investments, but they are traded on an exchange, such as the NYSE, instead of purchased directly from the issuing company. They also differ in their redemption structure and tax efficiency from traditional mutual funds.

Here are five benefits of ETFs over mutual funds:

1. Tax Efficiency: Upon redemption, mutual funds must sell its underlying securities, and the capital gains are then distributed to the owners of the funds. Since ETFs trade on an exchange and investors are selling to other investors, no underlying securities are sold, and no capital gains are distributed. If the makeup of the ETF changes it will, occasionally have to distribute gains, but it should be less frequent than with traditional mutual funds.

2. Lower Fees: ETFs are no-load funds, and you won’t be slapped with a redemption fee when it’s time to liquidate your position. Further, ETFs typically have lower annual fees than traditional Mutual Funds, making them an attractive alternative. (NOTE: In rare cases where a very small amount is being traded, broker’s fees may be a higher percentage of the investment than a mutual fund’s expenses would be, but in most of these cases the invested amount would not meet the minimum investment required by most mutual funds).

3. Liquidity: The exchange-traded structure of ETFs generally allow for liquidation of a position faster than a mutual fund, which must be liquidated at end of day. Further, the ability to set a limit order allows flexible trading that no investor could get from a mutual fund. Not all ETFs have the same liquidity, however, and it is important to review trading volumes and the ETF prospectus to determine whether you are comfortable with the frequency of trades.

4. Intraday Pricing: Because ETFs are traded on active stock exchanges, purchases and sales happen at market prices, rather than end-of-day Net Asset Value, which mutual funds use. As a result, one may purchase ETFs at a premium or a discount to the value of the underlying assets, and arbitrage is frequent.

5. No Minimum Investment: When starting investing, diversification can be cost prohibitive if you’re using traditional mutual funds, which frequently have a minimum investment of $2500 or more. Because ETFs have no minimum investment (other than the market price of one share), they are a good vehicle for diversified investing.

Of course, many of these benefits could be liabilities if not used properly. For instance, the intraday pricing feature of ETFs could lead an investor to buy an ETF at a premium or sell it at a discount to the value of the underlying securities. Also, brokerage fees may have a greater impact on some investors than traditional mutual funds’ management fees and loads would have.

Used wisely, ETFs can be a good vehicle for widely diversifying a small or initial investment. Even if you are a veteran of ETF investing, it is usually still a good idea to seek professional investing advice.

Filed Under: ETF General Information, Investing Tips Tagged With: , ,

Tips for Maximum ETF Success

August 19, 2011 By Leave a Comment

Managing a global portfolio of exchange-traded funds (ETFs) is a great way to build a diversified portfolio with exposure to equities around the globe. Fortunately, you need not be a rocket scientist to do this, but many investors fail to observe some basic guidelines, and it can get them into real trouble. Follow some of these ETF tips steps to achieve maximum success.

Liquidity Comes First

Before you even think of building an investment portfolio, you should set aside about six months of income in a “rainy day” account. This could be put into a money market fund or U.S. Treasury securities. Having this money set aside will ease your mind and allow you to be more open and creative with your global portfolios.

Separate Your Portfolios

You should separate your core conservative portfolio from your growth portfolios. With the core conservative portfolio, your top priority is capital preservation, and growth is a secondary consideration. Your growth portfolios are more speculative, with capital growth as the primary goal.

Diversify Your Portfolios

You need positions in your portfolios that are likely to offset each other as unexpected events and market movements become a reality. This is not accomplished with different sectors of ETFs or a mix of small-cap, mid-cap and large-cap ETFs. Rather the goal is to have some investments that are on both sides of risks.

For example, if the U.S. dollar declines, have some investments in precious metals or denominated in other currencies, such as Switzerland or Australia or Singapore ETFs. If inflation heats up, have some investments that hedge this risk such as timber, gold or Treasury inflation-protected bonds (TIPs). If political events or policies in one country take a turn for the worst, it is helpful to have investments in other well-developed countries to offset any loss of value. You get the idea, spread your risk and avoid having one ETF account for more than 5%-10% of your core portfolio.

Do Research and Pick the Best Countries

You need some guidelines to help keep you from getting carried away and having too concentrated a position in a particular country or region. In particular, take a good look at the following:

  • The stability and overall political and corporate governance.
  • The legal environment, respect for contracts, low levels of corruption, due process and rule of law.
  • The macroeconomic environment including fiscal discipline and currency strength.
  • Political risks that could affect financial markets.

Keep in mind that the quality of the countries you choose to invest in is the primary but not the only factor. The price or valuation of a country’s stock market is also extremely important. Oftentimes, the best time to buy into a country’s stock market is when it is beaten down, but there are signs that its economic and political problems will sharply improve. If you have a long-term perspective, you might consider annuities specially structured for ETF portfolios.

Monitor ETF Country And Company Exposure

Be careful to look under the hood of ETFs to see where your money is going. For example, let’s look at the iShares MSCI Emerging Markets ETF. It invests in 26 different countries, so it is natural to think that you will get broad exposure to all 26 countries. You would be wrong: 50% of your investment in this fund is going to four countries: South Korea, South Africa, Taiwan and China. In addition, incredibly, 7.5% is going to one company, Samsung Electronics of South Korea.

The same is true for the MSCI Europe, Asia and Far East index. It contains 21 developed countries, but 48% of the money you invest would go to just two: Japan and the United Kingdom. Meanwhile, less than 1% would go to Singapore and Ireland! Country specific ETFs such as the new iShares FTSE/Xinhua China 25 Index can also have a fair amount of concentrated risk. Although the China ETF tracks a basket of 25 companies, the largest five companies account for nearly 50% of your exposure. Right now anything that China is involved in financially, you will probably want to get involved with as well.

Cut Losses With A Trailing Stop-Loss Policy And ETF Put Options

We have all been there. You buy a stock or fund, and it appreciates in value rapidly. Then it stumbles and begins to decline. What do you do? Should you buy more, let it ride, or sell? Save yourself a lot of pain and agony by following a simple rule. If a position ever falls more than 20% from its high, sell it immediately and reassess the situation. If you invest in an ETF with a sizable downside risk, why not spend a few hundred dollars to purchase a put-option as an insurance policy?

Rebalance Your Portfolio

At least annually, you need to make some changes so that you are not overly exposed to countries that have higher risk factors and volatility. One way is by selling some shares of your winners and increasing exposure to under performers. This accomplishes another goal, locking in gains and taking some money off the table. Remember, only a fool holds out for top dollar, especially in the more volatile emerging market countries.

Building your portfolios with low-cost, tax-efficient ETFs is a smart strategy, but don’t set it on autopilot. Be sure that you are constantly reassessing all of your ETFs and making sure you are invested in what will work best for you.

Filed Under: ETF General Information, Investing Tips Tagged With: , , ,
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