Staying on top of up to the minute news like President Obama’s trip to the G-20 conference or Madonna’s pending adoption of a child from Malawi can distract investors from taking a breather to look back in time in order to get a better direction of where their investments may be headed in the future. Let’s take a look at how a couple of major indexes and index funds have performed since the beginning of the year to determine if your portfolio has the right balance of risk and return.
|
Focus
|
ETF
|
Year to Date
|
| U.S. Dollar |
PowerShares DB US Dollar Index Bullish
(NYSE:UUP) |
2.7%
|
| U.S. Equity |
SPDRS S&P 500 Index
(NYSE:SPY) |
-7.4%
|
| Technology |
PowerShares QQQ
(Nasdaq:QQQQ) |
8.5%
|
| Europe, Australia-Asia |
iShares MSCI EAFE Index
(NYSE:EFA) |
-11.5%
|
| Energy |
United States Oil
(NYSE:USO) |
-8.7%
|
| Precious Metals |
iShares Comex Gold Trust
(NYSE:IAU) |
-1.5%
|
| Fixed Income |
iShares Barclays 7-10 Year Treasury (NYSE:IEF) |
-4.0%
|
| Frontier Markets |
Market Vectors Africa ETF
(NYSE:AFK) |
-3.2%
|
| As of market close, April 6, 2009. |
When will the correction begin?
Everyone wants to know when the economic situation will improve, but the truth is no one knows for certain. The U.S. is ending its first full quarter with President Obama and his administration in
office. The call to repair the ailing U.S. economy has been met with the passage of a stimulus package. Time and the ability of businesses to serve existing and push forward into new markets will help drive the eventual economic recovery.
The
S&P 500 index, as tracked by the
SPDRS S&P 500 Index (NYSE:
SPY) fund, has continued to fall downward over the last year; however, this fund did start to rise in recent months as investors moved in to take advantage of low indexes in early March when the
Dow Jones Industrial Average fell below 7,000 and the S&P500 went below 700. (For a complete guide, check out our
Index Investing Tutorial.)
Pullbacks and Producers
Gold
futures prices, followed by the
iShares Comex Gold Trust (NYSE:
IAU) fund, have continued to
trade just under $900/oz. IAU hit as high as $91.44 on April 1, and since then has dropped about 6% to close April 6 at $85.37. The U.S. dollar index, followed by the
PowerShares DB US Dollar Index Bullish (NYSE:
UUP) fund, was also up for the year nearly 4% until April, but has seen a slight drop in the last three
trading sessions. Investors have sought out these two investments as protectors against the uncertainty in the markets.
Technology has jumped since the beginning of the year as top
PowerShares QQQQ (Nasdaq:
QQQQ) fund holdings like
Apple (Nasdaq:
AAPL),
Qualcomm (Nasdaq:
QCOM) and
Google (Nasdaq:
GOOG) all continued to trade in positive territory through April 6.
Frontier Markets
It’s interesting to note the performance of Frontier markets covered by funds like
Market Vectors Africa ETF (NYSE:
AFK) in comparison to traditional international investments covered by the
iShares MSCI EAFE Index (NYSE:
EFA) fund. Frontier markets include areas like South Africa, Nigeria and Morocco. Government corruption, hyperinflation and human rights abuses are a part of the story for the emerging economies of the African continent, but it is not the entire picture. Investors with a high-
risk tolerance and an extended
time horizon may consider doing more research in this region.
Final Thoughts
The point of this
index fund exercise is a reminder to investors to constantly focus on maintaining a diversified portfolio of investments. In addition, investors should also adopt an investment process for
rebalancing their holdings by selling a percentage of winning investments and reinvesting those earnings in whatever you deem important or back into the other investments in your portfolio lagging others. (Find out whether these funds can really deliver low-risk returns, read
Enhanced Index Funds - Shiny Paper Or Sparkling Gift?)
Source: By Gregory S. Davis www.investopedia.com
Much has been written about the math behind leveraged ETFs and mutual funds, yet most investors fail to realize the true impact. As a result, many of these products have been ridiculed for failing to meet user expectations.
Contrary to popular belief, leveraged and inverse products that reset their exposure level every day are not new. Rydex introduced the concept with the launch of Rydex Nova (RYNVX) in 1993 and Rydex Ursa (RYURX) in 1994 (note: Ursa has since been renamed Rydex Inverse S&P 500 Strategy).
However, as more and more leverage is applied in these products, the adverse impacts appear to grow exponentially. Direxion introduced 3x ETFs in late 2008, and now we have five months of data to look at.
For this example, I have chosen two inversely related leveraged funds: Direxion Financial Bull 3x Shares (FAS) and Direxion Financial Bear 3x Shares (FAZ). The chart below illustrates the returns for the five-month period from 11/6/2008 through 4/6/2009 for the following four scenarios:
Chart and data by www.FastTrack.net
401kDIRECT, a provider of retirement plan administrative services, has partnered with Mid Atlantic Trust Company to launch a new program that gives advisors and plan sponsors access to exchange traded funds. The ETFs will be available for 401k, 457 and 403b plans on the 401kDIRECT platform by means of the Mid Atlantic ETFxChange Program.
The exchange traded fund (ETF) program offered through 401kDIRECT and Mid Atlantic Trust Company is expected to eliminate many of the administrative challenges that ETFs once brought to daily recordkeepers, creating a cost effective ETF program for daily valued retirement plans. Mid Atlantic Trust Company is an independent provider of trust and custody solutions for retirement plans.
The program aims towards providing low fixed trading costs, ability to trade like mutual funds, providing virtually unlimited daily trading and ability to be offered alone or with traditional mutual funds.
David Wade, president of 401kDIRECT, said: "We are excited to bring this program to our clients. Our Advisors and TPAs will now be able to take advantage of the benefits of ETFs and construct diverse investment portfolios using ETFs, Mutual Funds, CIFs or any combination of these investment vehicles. They will be able to build a portfolio that best meets the needs of their clients, and most importantly, will be able to do so in a low fixed cost environment."
Source: insurance-business-review.com 
There are always tensions somewhere in the world but the global economic crisis has billionaire financier George Soros "very concerned" about the potential for rising social unrest.
"You have a collapse of the financial system that impinges on the life of ordinary people in a very big way," Soros says. "There's terrible human suffering and a lack of understanding why and where it comes from. It creates anger. People want to hit out."
Signs of this anger and potential unrest were evident at the G20 meeting last week, as well as current 
Volatility has been measured
April 7 (Bloomberg) -- Gold rose for the first time in four days in London after a drop to the lowest price in 10 weeks lured buyers, and as a decline in equities increased the metal’s appeal as an alternative investment. Silver also gained.
Bullion slipped 6.3 percent the past three days on speculation government efforts would revive the global economy, curbing demand for gold as a haven. The MSCI World Index of shares fell a second day as the euro-region economy contracted more than estimated.
“We fell too much yesterday,” and some investors and physical buyers may be taking advantage of lower prices, Bernard Sin, head of currency and metals trading at Swiss refiner MKS Finance SA, said by telephone from Geneva. “We fell as much as 3 percent yesterday and a lot of people were hurt.”
Gold for immediate delivery gained as much as $11.50, or 1.3 percent, to $880.40 an ounce, and traded at $879.75 by 10:47 a.m. in London. June futures added 0.9 percent to $881 an ounce in electronic trading on the New York Mercantile Exchange’s Comex division.
The metal rose to $879.25 in the morning “fixing” in London, used by some mining companies to sell production, from $870.25 at yesterday’s afternoon fixing. Bullion, trading 15 percent below the record $1,032.70 set in March 2008, has fallen 4.6 percent the past month while the MSCI Index has climbed 22 percent.
Europe’s recession deepened more than estimated in the fourth quarter, the European Union’s statistics office said today. Gross domestic product in the euro region declined 1.6 percent from the previous three months, the most in at least 13 years. A worsening economy has pushed exchange-traded fund holdings to records this year.
Inflation Concern
Investment in the SPDR Gold Trust, the biggest ETF backed by bullion, was unchanged at 1,127.37 metric tons yesterday, after declining on April 3 for the first time since March 23.
Bullion may climb back above $900 an ounce shortly should prices hold around $880, according to Pradeep Unni, an analyst at Richcomm Global Services DMCC in Dubai.
Gains above $900 would be “supported by the inflationary concerns due to the large bailout funds that have been pumped into various economies across the world,” he said in a report today. “This, in addition to investment demand, could prevent gold from an aggressive selloff.”
Among other metals for immediate delivery in London, silver rose 1 percent to $12.2563 an ounce. Platinum climbed 1.3 percent to $1,160 an ounce, and palladium was unchanged at $223.50 an ounce.
Source: Bloomberg.com
Author: Nicholas Larkin 
TOKYO (Reuters) - Gold prices edged up above $870 per ounce on Tuesday as technical charts suggested a sell-off, partly driven by a quick shift of investor money from the precious metal to riskier assets such as stocks, had been overdone.
FUNDAMENTALS
* Gold was at $871.40 an ounce at 0007 GMT, up 0.3 percent from New York's notional close of $868.80. Gold touched a low of $864.30 on Monday, the lowest since Jan. 23, as some investors unwound safe-haven positions, others sold as the dollar strengthened and some also unloaded gold along with other commodities including oil and base metals.
* The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, said its holdings stood at 1,127.37 tonnes as of April 6, unchanged from April 3 and just below a record 1,127.44 tonnes.
Source: Reuters 
Despite the market crash and credit crisis of 2008, exchange traded funds (ETFs) have seen prosperity and made unconventional headway.
The prosperity of the ETF industry has come at the expense of mutual funds. In 2008, there were 160 new ETFs launched as compared to a measly 21 new mutual funds. Additionally, net inflow into U.S. equity ETFs were a positive $120.8 billion versus $162.4 billion net outflow for U.S. equity mutual funds.
In March, the National Stock Exchange reports that more than $8 billion in net inflows went into ETFs. This reverses February’s anomaly, which saw $5.8 billion in net outflows, 
Greetings from the last day of my 30s, where, yes, everything is about me and my birthday. Nothing like a 4-handle birthday to make a guy more self absorbed than 
ETF Securities is spearheading an idea to gather groups of financial institutions to sponsor ETF's collectively where as current ETFs are generally sponsored by one single institution. The danger of the current system is what may happen to the ETF should the financial institution fail. (That could never happen right?) See the below from reuters:
A unit of London's ETF Securities has filed with the Securities and Exchange Commission to register platinum and palladium trusts in the United States, according to a notice on the SEC's website.
According to the website, ETF Securities USA LLC made an S-1 filing -- which companies use to register their securities with the SEC -- on behalf of the ETFS Platinum Trust and ETFS Palladium Trust on April 2.
ETF Securities declined to comment.
The company currently operates a range of exchange-traded commodities in Europe and Asia. If the filing results in a listing, the products will be the first platinum and palladium-backed ETFs in the United States.
ETFs issue securities backed by physical stocks of commodities, and have formed a major component of demand for precious metals especially in recent months.
Analysts say they fear strong ETF demand for platinum and palladium could cut supply for industrial users.
"This is an audacious move by ETF Securities and one that could have a major impact on platinum and palladium prices, both in the near term (if investors anticipate approval of these products) and in the longer term if the ETFs squeeze physical metal availability," said UBS in a note on Monday.
Source: reuters
Click on the following link for the actual S-1 filing:
VALLEY FORGE, Pa.--(BUSINESS WIRE)--Vanguard FTSE All-World ex-US Small-Cap ETF, which seeks to track the performance of the FTSE Global Small Cap ex US Index, has begun trading on the NYSE Arca exchange under the ticker symbol VSS. The launch brings the number of Vanguard’s ETFs to 39, with aggregate assets topping $44 billion.
VSS holds approximately 2,100 securities and has an expense ratio of 0.38%, making it lower-cost and more broadly diversified than the other small-cap international-focused ETFs available today.* It is the only international small-cap ETF in the marketplace to cover both developed and emerging international markets (Source: Lipper Inc., February 27, 2009).
“Many advisors are committed to providing international exposure within their clients’ portfolios, but until now a low-cost index option with developed and emerging market small-cap exposure was not available,” said Martha Papariello, principal, Vanguard Financial Advisor Services. “VSS serves as the ideal complement to Vanguard FTSE All-World ex-US ETF [VEU], which was introduced in March 2007 and holds mid- and large-cap securities.”
With a historically low correlation to U.S. small-cap securities, international small-cap ETFs can further diversify a portfolio containing only domestic and international large- or mid-cap stocks. VSS provides advisors with a low-cost option for customizing and diversifying their clients’ international portfolios.
Financial advisors seeking more information about Vanguard's ETFs and low-cost mutual funds can visit 
Dividend-paying stocks are compelling to investors for many reasons. Not only do they tend to be less volatile as a group and provide a real cash return right away, but they can also reflect management's long-range visibility on profits and show its commitment to partnering with shareholders.
Back in 2006, WisdomTree Investments presented its concept of weighting some of its equity ETFs not by each company's market value (as was the traditional indexing approach popularized by Vanguard), but rather by total dividends paid. WisdomTree's rationale made some sense -- at least in theory.
Indeed, it supported this theory by back-testing the strategy from 1964 to 2005 and found that not only did the portfolios exhibit lower volatility, but that "four of the six WisdomTree Domestic Dividend Indexes generated greater price appreciation than the S&P 500 Index, even without the reinvestment of dividends."
The problem was, this dividend-weighted theory rested on one enormous assumption: that the dividend-paying environment would continue to behave roughly the same way it had for that 41-year testing period.
Oops
As we're all now well aware, the dividend landscape has dramatically changed. The past 15 months have been the worst stretch for dividend investors in modern history. Sixty-two S&P 500 companies slashed their payouts some $40.6 billion in 2008 alone.
Another $41.8 billion in dividend cuts -- a record -- already came in the first 90 days of 2009, including cuts from traditional stalwarts like Capital One Financial (NYSE: COF) and State Street (NYSE: STT). Standard and Poor's expects S&P 500 dividends to decline some 23% this year -- the worst decline since 1938.
Needless to say, these massive dividend cuts have adversely affected WisdomTree's dividend-weighted strategy. As of Feb. 28, none of the six domestic dividend ETFs had outperformed the S&P 500 since their respective inception dates.
In fact, the worst-performing WisdomTree domestic dividend ETF has been the High-Yielding Equity Index (DHS) -- or as it was recently and curiously renamed, the Equity Income Index. Whatever name it goes by, this dividend-weighted ETF is down 48% since inception in 2006, much worse than the 29% lost by the S&P over the same period.
The wide underperformance of the ETF is largely a result of its dividend-weighted design, which is to "reflect the proportionate share of the aggregate cash dividends each component company is projected to pay in the coming year, based on the most recently declared dividend per share." In other words, if company A is expected to pay $500 in cash dividends next year, it should have a larger weight in the index than company B, which is expected to pay $250.
Handcuffed
Under normal circumstances, that sounds like a nice way to generate extra dividend income and stack your bets behind strong companies. This year, though, has been anything but normal. It's been the higher-yielding stocks whose dividends have been under the most pressure.
Adding insult to injury, the ETF only rebalances once annually, rendering it effectively helpless in a rapidly changing dividend environment. As dividend-dependent investors flocked out of stocks that dramatically cut their payouts, this ETF has had to sit and grin it out. All 10 of these stocks remain in the ETF's top 15 holdings to this day, despite the massive dividend cuts.
A better way
For investors seeking to benefit from the advantages of dividend-paying stocks, the WisdomTree Equity Income ETF is one investment to avoid. With dividends being slashed left and right in this market, selectivity is essential and mechanical strategies like this one are left at a major disadvantage. Among other things, savvy dividend investors will want to look for companies with solid balance sheets, a history of increasing dividend payouts, and plenty of free cash flow to cover the payments.
Source: 
