However, the breadth of ETFs is so great at this point that I would be remiss not to pull aside a few interesting plays to supplement any long-term portfolio you are developing. They are all radically different from each other, and offer different strategies for the long-term investor who is more conservative than aggressive.
Follow the Buybacks
The PowerShares Buyback Achievers Fund ETF (NYSEARCA:PKW) is just what its name leads you to believe. The ETF is intensely focused on companies that are buying back shares.
Now, I’ve often been skeptical of buybacks, because management tends to engage in this tactic when they have lost imagination about how to find more value in the organic business. However, some companies buy back stock for the right reasons – to return capital to shareholders.
This ETF focuses on companies that reduced their share count by 5% or more over the most recent 12 months. About two-thirds of these companies are large caps, but it shocked me that 24% or so are mid-cap companies, which I thought avoided buybacks.
It has also outperformed the S&P 500 since it launched in 2007, almost doubling against the S&P’s 78% gain. It is also up fourfold since the 2009 lows, whereas the S&P has returned 249%.
Some may say that going international isn’t conservative, but because international stocks have actually lagged domestic ones, they are safer than they appear. Also, financial stocks abroad have been given the cold shoulder, what with the weak economy and the Greek debt drama.
Focus on Europe
The iShares MSCI Europe Financials Sector Index Fund (NASDAQ: EUFN) invests in Europe’s largest financial institutions. With its 114 holdings, it is exceedingly diverse, yields 3.29%, and that yield helps finance the 0.48% expense ratio.