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November ETF Asset Report

The month of November was all about heightened Fed lift-off bets and geo-political flare-ups on the Paris terror attacks. While the first confirms the U.S. growth momentum, more so after the upward revision in the Q3 GDP numbers (from 1.5% to 2.1%), the second points to lingering geopolitical threats in the coming months. Investors seem to have reacted along the headlines. At least, the asset flow pattern says that. Let us explain the trend below. ETF Asset Gainers U.S. After nagging speculations on the rate hike timeline, direct hints from the Fed this time were well digested by the market. Investors appeared to have paid more attention to the improving economy than to the fears that cheap money will now call it quits. As a result, several U.S. ETFs found a place in the top-10 asset gatherers’ list with the large-cap U.S. ETF iShares Russell 1000 ETF (NYSEARCA: IWB ) being at the helm. The fund added over $2.6 billion in assets in the month. This propelled its AUM to $15.1 billion. Three other U.S. ETFs, small-cap iShares Russell 2000 ETF (NYSEARCA: IWM ), large-cap blend Vanguard S&P 500 ETF (NYSEARCA: VOO ) and large-cap growth ETF iShares Russell 1000 Growth (NYSEARCA: IWF ) added about $2.26 billion, over $811 million and over $717 million, respectively, to their asset base. Total Bond Market Probably to spread out the risk and earn returns in the face of an impending rate hike, investors opted for the total bond market approach. This increased investors’ lure for iShares Core U.S. Aggregate Bond (NYSEARCA: AGG ) which has exposure to both government and corporate bonds. Maturity-wise, the fund follows a diversified approach. AGG hauled in about $2.45 billion to exit the month with about $30 billion in assets. Developed Markets The wave of easy money polices across the international arena, be it in Europe or the Asia-Pacific, has brightened the appeal for the developed market. In fact, the Euro zone is mulling over further policy easing if deflationary risks shoot up. This is why funds like iShares Core MSCI EAFE (NYSEARCA: IEFA ) and iShares MSCI EAFE (NYSEARCA: EFA ) have attracted about $1.53 billion and $1.02 billion, respectively. Another ETF Vanguard FTSE Developed Markets ETF (NYSEARCA: VEA ) also added about $755.7 million in assets. ETF Asset Losers Short-term U.S. Bonds The Fed’s plans to raise the benchmark interest rates in December after almost a decade, will no doubt hurt the short-term bond ETFs the most. As expected, investors rushed to leave the zone and as much as $1.36 billion in assets gushed out of the short-term bond ETF iShares 1-3 Year Treasury Bond ETF (NYSEARCA: SHY ). Another ETF SPDR Barclays 1-3 Month T-Bill (NYSEARCA: BIL ) lost $552.8 million in assets. Gold As the Fed is gearing up for policy tightening, the greenback has gained strength and is weighing on gold. Prices of gold slipped to the six-year low in the month. Even a safe haven appeal in the wake of the terrorist attacks in several parts of the globe in November could not hold back investors from fleeing the yellow metal. SPDR Gold ETF (NYSEARCA: GLD ) had to sacrifice about $1.3 billion in net assets. High Yield As the yield on the benchmark 10-year U.S. government note rose to 2.23% (as of November 25, 2015) from 2.20% at the start of the month, investors started to dump all high-yield bond ETFs. Junk bond ETF SPDR Barclays High Yield Bond (NYSEARCA: JNK ) witnessed outflows of about $1.02 billion and took the third spot. Original post

The Cheapest Domestic Dividend ETFs

Summary I found five domestic dividend ETFs with expense ratios below .15%. The yields on three are fairly compelling. The sector allocations show strong allocations for several to consumer staples. Even though VIG has a low dividend yield, the fund offers great sector exposures. The high expense ratio goes to HDV, but it is only .14% and the sector allocations are great for investors that believe big oil will recover. There are a few big dividend ETFs for exposure to companies offering respectable dividend yields. In this article I want to compare a few of them. Let’s meet the 5 of the big dividend ETFs: Ticker Name Index SCHD Schwab U.S. Dividend Equity ETF Dow Jones U.S. Dividend 100™ Index VYM Vanguard High Dividend Yield ETF FTSE High Dividend Yield Index VIG Vanguard Dividend Appreciation ETF NASDAQ US Dividend Achievers Select Index DGRO iShares Core Dividend Growth ETF Morningstar® U.S. Dividend Growth Index HDV iShares Core High Dividend ETF Morningstar® Dividend Yield Focus Index Dividend Yields Since these are dividend ETFs, the first thing investors are going to be looking at is the dividend yield. The dividend ETF space is a great option for investors looking for higher yields on their portfolio but without a large enough portfolios to justify picking 30 to 50 individual dividend champions. The yields for these five range from 2.25% to 3.75% First Impressions Investors right away may notice that the Vanguard Dividend Appreciation ETF and the iShares Core Dividend Growth ETF don’t have a very high yield compared with the other dividend ETFs. It may be rational for investors looking at these funds to ask whether they should really be considered high dividend yield ETFs, but both of the portfolios are focused on companies that they expect to grow dividends significantly. Expense Ratios These funds were all selected for having extremely low expense ratios. The ratios range from .07% to .14%. While the Schwab U.S. Dividend Equity ETF technically only has 70% of the expense ratio of Vanguard’s options, the difference of .03% is not material. Even doubling from SCHD to HDV is still only increasing the ratio .14%. For the frugal investor, any of these options would be a reasonable choice so long as they are happy with the rest of the characteristics of the portfolio. Free Trading If investors are being careful with their cash and keeping an eye on factors like the expense ratio, then they may find free trading to also be very appealing. For the investor that is regularly investing more than $10,000 the commissions would cease to be a material factor, but for the investor that wants to be able to make several small purchases to keep building up their position each month for years the impact of commissions will add up. (click to enlarge) My Thoughts I would find any of these ETFs attractive. Personally I’m holding the Schwab U.S. Dividend Equity ETF and the decision was certainly influenced by free trading since I like to be able to add to my positions whenever there is a dip in prices. I expect to average purchasing ETFs one to three times per month. That is not three times for the same ETF, but I may be adding to positions in several sectors which would cause the commissions to start adding up. The other factor influencing me was the fact that SCHD is holding about 22% of the portfolio in the consumer staples sector. I don’t want to focus my investment efforts on market timing, so when prices feel high I look for more defensive allocations such as the consumer staples sector. This is the top allocation for VYM as well, though it is only around 14% to 15% of the portfolio. DGRO is also overweight on consumer staples at 17.65%, but industrials are the top allocation with 19.15% of the portfolio. VIG deserves a great deal of respect for the investor wanting more consumer staples in their portfolio. The fund has 26.43% of the portfolio in the sector. Even though the yield is lower on VIG, this is a solid portfolio. The biggest thing for investors here to consider is that the fund has only 2.31% to utilities, 1.26% to energy, and .10% to telecommunications. If an investor in VIG wants some Verizon (NYSE: VZ ) or AT&T (NYSE: T ), they’ll need to buy those shares individually. My favorite allocations arguably come from HDV though. The fund has a 20% allocation to both consumer staples and energy. For investors that don’t want to hold the oil giants, this would be a terrible choice. For investors that are happy to hold some of the oil champions, this is a great portfolio. The ETF offers a very strong yield and the exposure to oil helps an investor if oil prices go back up. If oil stays cheap, it will be a favorable development for the rest of the economy since it will drive down transportation costs and lead to many consumers having more cash in their pockets. For investors that want the oil exposure but don’t want to buy to buy into HDV because they have free trading on the others or because they are concerned about the slight difference in the expense ratio, they could buy their ETF of choice and simply buy some shares in Exxon Mobil (NYSE: XOM ) to get their oil exposure. What do You Think? Which dividend ETF makes the most sense for you? Do you want to overweight consumer staples for more safety in a downturn or would you rather have more upside in a prolonged bull market? Do you want to own the oil companies, or do you foresee gas as being in a long term downtrend that makes the business model much weaker?

Health Of Eurozone Recovers: ETFs To Watch

The eurozone is showing signs of a speedy recovery, as evident from the four and a half year high expansion in its business activity for the month of November. According to a flash estimate by data firm Markit, the eurozone purchasing managers’ index inched up to 54.4 this month from 53.9 in October . This surpassed the threshold score of 50, which hints at an expansion in activity. The growth profile has weakened in recent times in the eurozone, failing rounds of monetary easing. The bloc recorded 0.3% growth in Q3, declining from a 0.4% rise in Q2 and falling short of market expectation. The growth rate in Q3 was the softest in a year as development cooled down in the eurozone’s heavyweights Germany and Italy. In such a backdrop, the news of fast-expanding business activity spread optimism among investors. New business growth was noticed in both service and manufacturing sectors. Germany turned up a super performer as companies experienced “their strongest monthly gains in new business orders for two years”. The boost has come at an opportune moment, when the ECB is mulling over further easing in policies to boost inflation and economic growth. The European Central Bank (ECB) president, Mario Draghi, reassured of a more intensified and protracted QE measure, if need be. He reaffirmed the evaluation of the monetary policy by the end of this year based on a volley of economic data. However, the latest upbeat data raises confusion over the ECB’s potential altruism in the December meeting, forcing some to believe that further easing may not be as generous as thought previously. But a stubbornly low inflation profile, thanks to the commodity market rout, gives all reasons to expect further monetary easing from the ECB. Overall, the chief economist at Markit indicated that the eurozone was “on course for one of its best quarterly performances over the past four and a half years.” Based on this data, he expects the euro bloc to post 0.4% economic growth in the final quarter of the year. Meanwhile, Greece received a bailout loan from the euro area member states as the former agreed to enact the stated austerity measures. ETFs to Watch Below, we highlight three European ETFs that could be tapped to play the latest uptick in business sentiments. To do this, we land up on currency-hedged ETFs, as this is the most-watched investing technique currently, thanks to opposing monetary policies in the U.S. and the eurozone. While the greenback is strengthening on a looming rate hike in the U.S., the euro is sliding on accommodative policies by the ECB (read: Guide to Currency Hedging ETFs ). WisdomTree Germany Hedged Equity ETF (NASDAQ: DXGE ) Since Germany was the main driver of the latest surge in business activity, German ETFs warrant a look. This German ETF holds 75 securities in its basket. It has a slight tilt toward the consumer discretionary sector, with 21.7% share, followed by double-digit exposure each in financials, industrials, materials and healthcare. It has managed assets worth $286 million, and trades in good volume of 165,000 shares a day, on average. The fund charges 48 bps in annual fees, and is up 9.6% so far this year (as of November 23, 2015). DXGE has a Zacks ETF Rank of 2 with a Medium risk outlook. WisdomTree Europe Hedged Equity ETF (NYSEARCA: HEDJ ) This fund can be viewed as a replica of the broad-based European growth. The fund appears rich, with AUM of nearly $21.3 billion. Its expense ratio comes in at 0.58%. Holding 130 securities in its basket, the product is pretty well spread out across components, with no firm making up for more than 6.19% of its assets. Consumer staples, industrial, consumer discretionary, financials and healthcare each have double-digit weight in the fund. In terms of country allocations, Germany and France are leading with 26.1% and 24.2% share, respectively, followed by the Netherlands (17.2%) and Spain (16.5%). The Zacks Rank #3 (Hold) fund is up 11.2% so far this year (as of November 23, 2015). WisdomTree Europe Hedged SmallCap Equity ETF (NYSEARCA: EUSC ) Since small-caps companies tend to pick up more when an economy improves, a look at the small-cap European companies seems justified. The fund provides exposure to close to 237 of the smallest European companies. This ETF has amassed about $245.7 million. The product is highly diversified, with no stock accounting for more than 2.06% of the portfolio. Sector-wise, industrials get the maximum exposure, at 25.9% of the portfolio. Financials and consumer discretionary also get double-digit allocation each, while energy gets the least exposure, at only 2.35% of the basket. As far as country exposure is concerned, Italy (21.1%), Germany (17.2%), France (16.4%) and Finland (13.1%) get top priority. The fund charges 58 bps in fees, and is up about 1.6% so far this year. Original Post