ETFs Offer More Innovation than Other Options

Innovation: Another Reason to Choose ETFs

There are myriad reasons why investors should choose exchange-traded funds (ETFs) over mutual funds. Factors such as much lower expense ratios (i.e. lower costs), greater tax efficiency, increased access to targeted markets and much more transparency are just some of the headline reasons why I recommend investors choose ETFs as their primary investment vehicles.

Yet one very important reason why I’ve come to really love ETFs, particularly during the past several years, is product innovation.

Now, most ETFs still are index-based, traditional funds that are pegged to particular market indexes such as the S&P 500 or the NASDAQ 100. Yet these funds, known as “vanilla funds,” are by no means the only types of ETFs out there. There are leveraged ETFs, actively managed funds, inverse funds, funds that track relative strength and even funds with an “ethical” focus.

These days, there’s an ETF for just about every flavor of investor, not just the ones who like the taste of vanilla.

One fund that I find a particularly interesting example of ETF innovation is the LocalShares Nashville Area ETF (NASH). Launched less than a year ago, NASH is designed to offer investors a targeted focus on companies headquartered in the boom town of Nashville, Tennessee. Some of the current holdings in NASH are LifePoint Hospitals (LPNT), HCA Holdings (HCA) and Dollar General (DG).

This city-focused fund is one great example of how diverse ETFs have become of late. The fund’s outstanding gain of nearly 12% since inception also demonstrates how well an extremely targeted ETF can perform.

The bottom line here is that when it comes to innovation, all of the action seems to be in the ETF corner. Mutual funds just aren’t doing the kinds of things ETFs are doing right now, and that’s another reason why investors should choose ETFs.

ETF Talk: Take a Close Look at China

We featured FXI, a general Chinese exchange-traded fund (ETF), a little more than a month ago, and that fund’s upward climb warrants us looking at other ETFs focused on that huge emerging market. To that end, today’s ETF Talk will introduce you to two ETFs, with each fund tracking different areas of China’s market: small caps and the consumer.

Guggenheim China Small Cap ETF (HAO) traces the results of an index that follows publicly traded small capitalization companies based in mainland China. In other words, HAO profits on the success of smaller publicly traded Chinese companies. While this fund is about even this year, losing 1.43%, it has just climbed back from a big April-May tumble. Historically, HAO has bounced back strongly from midyear declines to close out each year. It also offers a dividend yield of 2.16%.

While Chinese small caps have done well in recent weeks, companies that serve China’s consumers generally are having a rough year. Global X China Consumer ETF (CHIQ), a non-diversified fund, follows the results of an index that measures the equity performance of investable companies in the consumer sector of the Chinese economy. This ETF has lost 7.28% so far in 2014, mostly in successive plummets during the first half of the year. Despite the lack of strength in the Chinese consumer sector, the chart below shows CHIQ starting to recover from its early-year lows. CHIQ’s yield is 1.03%.

As the preceding charts show, the overall Chinese market, as represented by FXI, has been trending upward, but this pattern does not extend to every sector in China. Small caps are mirroring the upswing, but consumer stocks have not followed in the recovery. My hope is that by delving into a general trend, you can identify sectors that have begun to ascend and others that could rise next.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful ETF Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

What’s Your Portfolio’s ETF Status?

Where do you stand right now with your portfolio?

If you can’t answer this question immediately, then you have some work to do. Given that we are just a little more than halfway through the calendar year, I think that’s as good a time as any to make sure you fine-tune your focus for the second half of what has so far been a most unusual year.

In recent issues of the Weekly ETF Report, we pointed out how important it is to conduct a halftime review of your holdings to make sure the stocks, bonds, mutual funds and, hopefully, exchange-traded funds (ETFs) you own are meeting your overriding investment objectives.

Of course, before you can tell if your holdings are meeting your goals, you have to know what your goals really are.

So, are you primarily a growth investor, or is income generation your chief goal? Are you the aggressive type that likes to roll the dice, or are you a restless sleeper that likes to know your money is safe, sound and tucked away?

The answer to these questions is crucial when trying to sort out your situation with ETFs. Fortunately, no matter what kind of investor you are, there’s an ETF to fit your needs.

You see, when it comes to ETFs, particularly ETFs for the growth investor, the world is your proverbial oyster. You can choose from a variety of ETFs including sector ETFs, regional ETFs, market-capitalization ETFs and even actively managed ETFs.

Basically, if there’s a way to invest for growth, there’s an exchange-traded fund that can help. So, when you’re sorting out your situation for the remainder of the year, be sure you do so with ETFs.

Let Us Coach You

So, did your portfolio outperform the market through the first half of the year? Are you disappointed by the results you’ve received this year? Do you have a lot of cash on the sidelines that you don’t know what to do with?

If your answer to any of these questions is “yes,” then you need our Wealth Coaching services. You see, when it comes to your money, it’s always personal. That’s why we offer One-on-One, personal Wealth Coaching sessions directly with me, Doug Fabian.

These 90-minute, One-on-One Wealth Coaching sessions begin with a review of your goals and your existing investments. Then, we develop a plan specifically tailored to you, including how Fabian Wealth Strategies can help you get where you want to be.

Contact us today at 800-391-1118 to schedule your FREE, no obligation one-on-one Wealth Coaching session, and find out how Fabian Wealth Strategies can work for you.

NOTE: Fabian Wealth Strategies is a SEC registered investment adviser, and is not affiliated with Eagle Financial Publications.

Introducing the New Successful ETF Investing

After nearly four decades of helping investors make money, the one thing we know is that in order to continue delivering the best possible investment advice, we have to keep evolving and keep adjusting to the tools the market provides. This is a philosophy that my father, Dick Fabian, held when he first started the flagship Fabian publication, and this is a philosophy that still operates at the core of our business approach.

Our belief is that ETFs will continue to dominate the investment landscape, and that means they also should be the primary vehicles in your investment portfolio. With that concept at the forefront, I am proud to introduce the new Successful ETF Investing newsletter.

Our newly redesigned, revamped and renamed publication offers an enhanced focus on ETFs, a focus that includes new sections, new features and new portfolios to help income, growth and even very aggressive investors make more money.

One example of a pick designed for the aggressive investor is the recent addition of a small-cap, country-specific ETF in one of the hottest emerging market countries in Asia. We made gains of more than 25% on this pick, and that’s the kind of profit potential we’re seeking in our new aggressive recommendations.

We are very proud of our tuned-up version of Successful ETF Investing, and we know you’re going to love it. Check out Successful ETF Investing right now to discover what it’s all about.

Pointing Out Tax Hypocrisy

“A democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.”

–Alexis de Tocqueville

When it comes to true chutzpah, there is nothing like being subject to pay a tax that’s been voted on by your neighbor — and one that your neighbor doesn’t also have to pay. The great Alexis de Tocqueville knew this and warned us all of the dangers nearly 200 years ago.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Weekly ETF Report readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Ask Doug.

In case you missed it, I encourage you to read my e-letter column from last week on Eagle Daily Investor about why you should assess your ETF situation. I also invite you to comment in the space provided below my Eagle Daily Investor commentary.

All the best,

Doug Fabian

San Francisco MoneyShow, Hilton Union Square, Aug. 21-23: I’ll be speaking at the San Francisco MoneyShow this August, and I hope to see you there. Other speakers at this year’s event include Dr. Mark Skousen, Rich Karlgaard (publisher, Forbes), Roger Conrad, Elliot Gue and John Ransom. Admission is complimentary to my subscribers, but you must register: For details, call the Money Show at 800-970-4355 and mention priority code 035777.