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Is Sugar The Best Commodity ETF Right Now?

2015 has been a bad year for both soft and hard commodities. Notably, S&P GSCI Total Return – the benchmark for commodity market performance – nosedived about 19.3% in the third quarter, representing the fifth worst quarter and the third worst third quarter since 1970. With this, the index is on the verge of recording the sixth worst year after 2008. The blame is largely heaped on the stronger dollar, global growth worries, plunging oil prices and weakening demand that have dampened the appeal for commodities. Economic slowdown in China is a major setback for the commodities market, as the world’s second-largest economy is also the world’s largest buyer of raw materials. However, there seems to be a torchbearer in this commodity market blackout. This is sugar, as its price has recovered as much as 30% since touching its seven-year nadir on August 24. Last week, sugar was the only commodity (except steel) that registered a double-digit rise of around 10%. The upsurge was mainly driven by the appreciation of the Brazilian real against the U.S. dollar, and Brazil’s decision to hike fuel prices. Sugar is greenback-priced in Brazil, the largest producer of the agricultural commodity in the world. Therefore, a weaker dollar discourages sugar exports from the country, lifting up its prices in the world market. Shortage of production is another issue that is playing on the bullish trend in sugar prices. As per International Sugar Organization , sugar cane processed this season in Brazil declined 2.1% to 412,624 million tons, while sugar output in the country is down 11% from the prior year, as mills are converting more cane to ethanol in response to a possible hike in gasoline prices. India, the world’s second-largest sugar producer, is also expected to experience a 5% fall in sugar output to 28.3 million tons in 2015, as per Indian Sugar Mills Association, thanks to the El Nino weather condition that is causing insufficient rainfall in the region. According to a note by Morgan Stanley, sugar consumption is expected to exceed demand for the first time in six years. The firm expects consumption to outdo demand by 3.7 million metric tons in the marketing year that began on October 1. Riding on the bullish trend in sugar prices, ETFs that are exposed to this soft commodity have been experiencing handsome gains (some double digits as well) over the past one month. Below, we highlight three of those ETFs that investors should definitely consider in this otherwise bearish commodity market (see all Agricultural ETFs here ). iPath Dow Jones-UBS Sugar Total Return Sub-Index ETN (NYSEARCA: SGG ) SGG tracks the Dow Jones-UBS Sugar Subindex Total Return Index, which provides the returns that are seen in an investment in the futures contracts on the commodity of sugar. The note has garnered nearly $56 million in assets, and trades in a daily volume of 48,000 shares, on average. It charges 75 bps in annual fees. The note was up 15.2% in the past one month, and has a Zacks ETF Rank #3 (Hold) with a High risk outlook. Teucrium Sugar Fund (NYSEARCA: CANE ) This ETF tracks the Sugar Futures index, which reflects the daily changes of a weighted average of the closing prices for three futures contracts for sugar that are traded on ICE Futures US. The fund is nearly overlooked, as it has gathered nearly $4 million in assets and trades in a paltry volume of around 5,000 shares. However, the ETF is expensive, charging a hefty 176 bps in fees from investors per year. It was up 9.8% over the last one month, and carries a Zacks ETF Rank #3 with a High risk outlook. iPath Pure Beta Sugar ETN (NYSEARCA: SGAR ) This is another sugar ETN by iPath, and follows the Barclays Capital Sugar Pure Beta TR Index. The index consists of a single futures contract, but it has a unique roll structure which selects contracts using the Pure Beta Series 2 Methodology. SGAR is also neglected, with only $1.4 million in AUM, and is thinly traded, with average volume of nearly 2,000 shares. The note charges 75 bps in annual fees, and was up 12.5% in the past one month. It also carries a Zacks ETF Rank #3 with a High risk outlook. Original Post

No Imminent Lift Off? Time For These Dividend ETFs

Dividend investing has seen a lukewarm year so far in the U.S. as the markets speculated a faster-than-expected Fed lift-off prompted by steady growth in the domestic economy. As a result, most dividend ETFs are trading in red in the year-to-date frame. However, a volatile start to Q4 has once again put the spotlight on income-focused investing. Moreover, a still-patient Fed and the likelihood of more cheap money inflows cheered up dividend investing all over again. Be it bonds, high dividend equities, or pass-through securities, picks that target higher yielding securities have fared well since the dovish September Fed meet. The allure rose further after the U.S. economy reported sub-par job data for the month of September last week. The soft jobs’ report has raised questions over the health of the U.S. economy and the fate of Fed’s policy tightening. Headline job gains for September came in at 142K versus the estimated 200K and the prior month’s tally of 136K (read: ETFs that Gained & Lost Post Dismal Job Data ). The originally reported July tally was also revised lower to 223K from 245K originally. The year-to-date monthly pace of job gains now averages 198K, though the pace for the last three months was way lower at 167K. This goes against the monthly average of 260K for 2014. While a subdued inflation data and global growth worries were already obstacles on the course of the Fed policy, the job data made the case worse and Fed’s policy tightening seems some way off. Investors who were earlier overconfident about a December rate hike in the U.S., have now started to push back the timeline to early next year, presuming a sluggish U.S. economic rebound. While it is a decent setting for capital gains, Treasury bond yields slumped and are at 2.07% at the time of writing, leading some to believe that a new bull market may be at hand. In this type of an environment, investors can count on income picks for Q4. While individual stock pick is always an option, ETFs give options to fairly diversify one’s portfolio. 4 Dividend ETF Picks for Q4 SPDR S&P International Dividend ETF (NYSEARCA: DWX ) If you want to stay global, DWX could be your ticket as this fund focuses only on high yielding stocks from around the globe. After all, most developed economies are supposed to carry on their accommodative stance next year unlike the U.S. This is done by tracking the S&P International Dividend Opportunities Index, a benchmark that holds about 100 securities in its basket. Currently, the $1 billion-fund is a bit heavy on traditional high yield sectors like financials (24.8%), utilities (22.8%), telecom (15.9%), and energy (14.2%), though no single company accounts for more than 3.4% of the total assets. In terms of yields, this pays a solid 5.91%, while it charges investors a reasonable 45 basis points a year in fees for the service. The fund was up over 6.9% in the last five days (as of October 5, 2015). Vanguard High Dividend Yield ETF (NYSEARCA: VYM ) This large cap centric fund provides exposure to the high yielding U.S. dividend stocks by tracking the FTSE High Dividend Yield Index and could thus be a lucrative option for those seeking higher current income. The ETF is one of the largest and popular choices in the dividend ETF space with AUM of over $10.3 billion. Expense ratio comes in at 10 bps (read: 3 Excellent Dividend ETFs for Growth and Income ). In terms of sector, the fund is widely spread out with financials, consumer goods, technology, industrials, health care, and oil & gas taking double-digit exposure in the basket. The fund yields 3.33% as of October 5 and was up over 5.6% in the last five trading sessions. The ETF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: 3 Cheap Value ETFs with Strong Dividend ). Schwab U.S. Dividend Equity ETF (NYSEARCA: SCHD ) This fund tracks the Dow Jones U.S. Dividend 100 Index, which measures the performance of high dividend yielding U.S. stocks that have a record of consistently paying dividends. Notably, companies, that raise dividends regularly, appear steadier than those which offer higher yields. In a market crash, these dividend aristocrats stand out pretty strong and navigate through volatility. The product has already amassed roughly $2.51 billion in assets and has a dividend yield of 3.15%. The fund charges a meager 7 bps in fees and trades in solid volume of more than 500,000 shares per day. Consumer Staples is the fund’s focus sector with about one-fourth exposure followed by IT (19.74%) and Industrials (13.85%). It currently has a Zacks Rank #3 and added about 5.3% in the last five trading sessions (as of October 5, 2015). SPDR Dividend ETF (NYSEARCA: SDY ) This fund provides exposure to the 102 U.S. stocks that have been consistently increasing their dividend every year for at least 25 years. It follows the S&P High Yield Dividend Aristocrats Index and has amassed $12 billion in AUM. Volume is solid, exchanging more than 765,000 shares in hand, while expense ratio comes in at 0.35%. The product is widely diversified across components as each security accounts for less than 2.81% of total assets. Financials is the top sector taking up one-fourth of the portfolio while consumer staples (15.1%), industrials (13.4%) and utilities (11.8%) round off the next three spots. The fund was up nearly 5% in the last five days and has a Zacks ETF Rank of 3. Link to the original post on Zacks.com

My ETF Pick List: ETFs For Risk And Value Seekers

Summary As the economy is slowing down, it is worth having a look at options to protect your portfolio such as a short ETF. People overestimate their investing skills and therefore are at risk of losing money which can be prevented. ETFs offer the opportunity to investors who simply lack the time or expertise of a certain fund, industry or country but would like to reap the benefits. The water industry has taken a hit the last few weeks, creating numerous buy opportunities. Some people advocate not to invest in ETFs because you diversify too much of your wealth, and as a result, you might diminish your return. Moreover, you pay an additional cost for buying an ETF (the expense ratio). Yet, statistics have always shown that passive traded funds have beaten active funds over an extended period of time . In the same article, it is also shown that a higher expense ratio is often linked to lower performance rates. Furthermore, investors overestimate their ability to predict market events and, therefore, take too much risk in the market. Reasons enough to have a look at what ETFs have to offer. In this article, I will keep it simple and show a wide availability of ETFs which I consider having significant potential for any kind of investor, retiree to value and risk seekers. I always divide a small portion of my portfolio to ETFs to diversify but also to improve my mathematical odds in regards to obtaining better than average returns. The mathematical probability that you pick a winner out of 30 stocks is lower than obtaining a positive return out of an ETF which tracks 30 stocks at once. Furthermore, I sometimes lack the experienced expertise in a specific sector and, therefore, an ETF is a perfect solution to that problem. ETFs for risk-seeking investors As some people are worried about the progress of economies in the world, such as Germany (and as a result slowing down growth and tumbling markets ) I picked a few ETFs which could take advantage of this situation. This is useful for investors who lack knowledge about how to use option strategies or futures to short a market. One can short the American stock market by, for example, buying the ProShares Short QQQ ETF (NYSEARCA: PSQ ) or buying the ProShares Short Dow 30 ETF (NYSEARCA: DOG ). Keep in mind that short ETFs comes at a higher price as their expense ratio is higher than a normal ETF. In Europe, one could use the ProShares UltraShort FTSE Europe ETF (NYSEARCA: EPV ) to short the stock market of England. Plenty of choices and whenever the market tumbles down I would recommend any of these ETFs if you don’t want to be exposed to higher leverage such as with options or futures. As the bull market has been strong the last few years, the short ETFs have been performing dreadfully: While the opposite ETF, the PowerShares QQQ Trust ETF (NASDAQ: QQQ ), has seen outstanding performance over the last 5 years: Just to prove an important point, this is the performance of QQQ in comparison to Ford (NYSE: F ), Boeing (NYSE: BA ), Wal-Mart (NYSE: WMT ) and Exxon Mobil (NYSE: XOM ), 4 large American multinationals: The graph clearly proves the point that holding these 4 large American multinationals would not have outperformed the market over a period of 5 years. This builds a case towards ETF-based investing, especially as the world of academia has shown many times that investors overestimate their ability to predict market events and, therefore, take too much risk on the stock market. One more argument to prove my point is an example of the economy of Brazil. Once a growth economy, now their currency is hitting a shattering low while unemployment is at a 5-year peak. The ProShares UltraShort MSCI Brazil Capped ETF (NYSEARCA: BZQ ) has been through the roof as a result: This was a much easier choice in comparison to cherry picking any of the stocks on the Brazilian market. ETFs to protect against rising interest rates Furthermore, there are products called Exchange Traded Notes, debt instruments which allow the investor to protect themselves against either rising or diminishing interest rates such as these steepeners and flatteners , the iPath U.S. Treasury Steepener ETN (NASDAQ: STPP ) and the iPath U.S. Treasury Flattener ETN (NASDAQ: FLAT ). ETFs for investors seeking value Deep value is hard to find when the stock market is priced at a high P/E. Finding a winner in a bucket of stocks is even more difficult. This is especially the case when it comes to more unknown stocks in sectors which are being ignored by most investors. One of those sectors is the water industry. The water industry comprises of firms that provide drinking water and waste-water services (including sewage water treatment) and irrigation solutions to homes, businesses and manufacturers. The Water Industry (click to enlarge) Source : Water UN The water industry does not receive as much coverage as the solar industry and electric car industry. In my view, this is because the water industry is a bit more boring than the solar and electric car industry. Yet, in my view, it shouldn’t be and there are good reasons for that. Only half a percent of fresh water is being used worldwide while over 1 billion people are still having severe water supply issues: Source : Water UN The water scarcity problem will become much more severe in the coming years: (click to enlarge) Source : Water UN There are 3 water ETFs that play their own individual role in battling the issues of water scarcity. I’ve covered all 3 on Seeking Alpha before: the First Trust ISE Water Index ETF (NYSEARCA: FIW ), the PowerShares Global Water Portfolio ETF (NYSEARCA: PIO ) and the PowerShares Water Resources Portfolio ETF (NYSEARCA: PHO ). Their overall share prices have fallen over the last few months, opening a potential entry point. Conclusion This article is important as it perfectly addresses many of the issues numerous investors currently face – not having the expertise to invest in a sector due to lack of time, wary of investing due to the bull market and the realization that many investors don’t obtain profitable returns overall. Investors tend to overestimate their skills and not every investor is successful. Yet, by following a simple basket of stocks, you enhance your chances of obtaining a positive return while lowering your overall risk. The Brazil ETF clearly indicates that you can also obtain solid above average returns with ETFs. ETFs are an important part of my portfolio due to the above-mentioned reasons. Yet I also hold numerous stocks and financial derivatives in my portfolio (as I work in that specific industry) and consider myself knowledgeable on the industry those firms are active in. When it becomes too specific, I consider ETFs as a good alternative choice. Therefore, I consider the water ETFs as a good value investment for the future. The underlying fundamentals of the water scarcity problems are so underestimated currently in the world that it’s simply a waiting game until investments in these firms will grow significantly. Now is the time to buy these firms. Scarcity of water will spur bright technologists and scientists to invent large scale new technologies in this industry. This will become a very profitable commerce in the future.