“Diversify with low-cost exchange-traded funds More than $1 trillion is currently invested worldwide in exchange-traded funds, and those assets continue to grow as new ETFs are introduced and investors discover the concept. International ETFs are especially hot in 2010, while those focused on specific industries such as utilities, banking and technology are also gaining assets. By holding baskets of stocks, bonds or commodities, ETFs replicate indexes or sectors with a goal of low-cost diversification. ETFs are traded on an exchange so you can buy and sell during market hours, unlike a mutual fund in which you trade shares at the end of the day,” Andrew Leckey Reports From Times Dispatch.

“I use ETFs mainly for targeted niche exposure because it is a good way to get at areas where a good mutual fund doesn’t exist,” explained Mark Salzinger, editor of The Investor’s ETF Report in Brentwood, Tenn. “In all my client accounts I have both mutual funds and ETFs because I think a combination of the two is optimal.”

Leckey continues to say, “His international ETF focus is on Chile and Brazil, neither available in its own mutual fund. The iShares MSCI Chile ETF (ECH) is attractive because that country’s copper exports are in high demand from China and India because they build infrastructure, he said. Though riskier, the small-cap Market Vectors Brazil Small-Cap ETF (BRF) lets an investor get deep into that burgeoning market, he said. For those bullish on the U.S. economy, technology offers potential because tech companies have lots of cash, little debt and good product cycles, said Salzinger, who likes Vanguard Information Technology ETF (VGT) in that industry.”

“While you must pay to trade ETFs, their annual fees are generally lower than even index mutual funds. “There are also tax advantages with ETFs for nontax-deferred accounts since they’re treated like a stock and you don’t have any tax issue until you sell them — unlike a mutual fund,” said John Mauldin, president of the Dallas-based Millennium Wave Investments advisory firm. Despite that advantage, ETFs shouldn’t be considered a “silver bullet” to win big in the current market, Mauldin cautioned. He recommends gradual investment in them rather than tossing a large chunk of money in a specialized niche,” Leckey Reports.

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Here are some details on the ETFs mentioned above:

The investment (ECH) seeks to track the performance of MSCI Chile Investable Market index. The fund invests at least 90% of assets in the securities of the underlying index or in depositary receipts representing securities in the underlying index. The underlying index is a free float-adjusted market capitalization index that is designed to measure broad based equity market performance in Chile. The fund is nondiversified.

TOP 10 HOLDINGS ( 72.39% OF TOTAL ASSETS)

Company Symbol % Assets Banco Santander-Chile N/A 4.77 CAP N/A 4.5 Cencosud SA N/A 5.12 Empresa Nacional de Electricidad (chile) N/A 10.2 Empresas Cmpc SA N/A 8.83 Empresas COPEC N/A 13.57 Enersis SA N/A 11 Lan Airlines SA N/A 4.39 S.A.C.I. Falabella N/A 3.68 Sociedad Quimica y Minera de Chile N/A 6.33

The investment (BRF) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Brazil Small-Cap Index. The fund normally invests at least 80% of assets in securities that comprise the Market Vectors Brazil Small-Cap Index. It may also utilize derivative instruments, such as swaps, options, warrants, futures contracts, currency forwards (and convertible securities and structured notes), and participation notes to seek performance that corresponds to the Brazil Small-Cap Index. The fund is nondiversified.

TOP 10 HOLDINGS ( 37.56% OF TOTAL ASSETS)

Company Symbol % Assets Anhanguera Educacional Participacoes SA N/A 3.02 BR MALLS PAR-ON NM BRML3.SA 3.07 Diagnosticos da America S.A. N/A 3.07 GAFISA -ON EB NM GFSA3.SA 3.1 LLX LOG -ON NM LLXL3.SA 4.54 LOJAS RENNER-ON INT NM LREN3.SA 4.74 MRV -ON NM MRVE3.SA 4.28 PORTO SEGURO-ON INT NM PSSA3.SA 3.67 SUL AMERICA -UNT N2 SULA11.SA 4.82 Transmissora Alianca de Energia Eletrica SA N/A 3.25

The investment (VGT) seeks to track the performance of a benchmark index that measures the investment return of information technology stocks. The fund employs a passive management investment approach designed to track the performance of the MSCI U.S. Investable Market Information Technology index. This index consists of all capitalizations of stock in the technology sector. This sector is made up of companies in technology, software, Internet applications systems, databases, consulting, data processing, outsourced services. It is non diversified.

TOP 10 HOLDINGS ( 56.03% OF TOTAL ASSETS)

Company Symbol % Assets Apple Inc. (AAPL) 7.72 Cisco Systems, Inc. (CSCO) 6.34 EMC Corporation Common Stock (EMC) 1.6 Google Inc. (GOOG) 5.58 Hewlett-Packard Company Common (HPQ) 5.27 Intel Corporation (INTC) 5.1 International Business Machines (IBM) 7.38 Microsoft Corporation (MSFT) 9.68 Oracle Corporation (ORCL) 3.88 QUALCOMM Incorporated (QCOM) 3.48

 

 

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