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Get Off The Roller Coaster With Vanguard Total Stock Market ETF

Roller coaster start for investors in 2016 This year, evidence of stress came early as the market dropped like a brick before swinging back up like a rocket. Rampant, wrenching, volatility is maddening for many investors who see no choice but equities for financial gains in the current low interest rate savings environment. Picking individual stocks is risky in a traders’ marketplace. For the long-term investor, a maximally diversified ETF may reduce stress helping to weather short-term shocks like those that were seen last January while offering modest gains across a 5 to 10 year time horizon and greater peace of mind. Volatility and Downside Risk Recent Fed commentary and behavior can only confuse the Markets, and that spells continued and perhaps even greater volatility . The contradictory nature between the ” Fed speak” of the Chair, Janet Yellen, and other members of the FOMC has sent mixed messages about removing unprecedented accommodation from U.S financial markets. Yellen’s dovish response to maintain low interest rates in the U.S. signals a fear of declining global economic growth. The picture concerning the future direction of interest rates is clouded and that presages the possibility of a continued roller coaster stock market ride. At Fortune’s Global Forum, JPMorgan (NYSE: JPM ) CEO, Jamie Dimon, hinted at expected greater volatility stating that, “markets will be scary until a normal interest rate environment returns.” This view is mirrored in the recent low interest rate of the 10 year U.S. Treasury Bill which has fallen to 1.77% as scared money retreats from the markets. For some savvy traders, volatility may translate into higher short-term returns, but this isn’t always the case because the psychology of greed, and more importantly, in my experience, of fear, can reverse markets on a dime. This can result in devastating losses for some market segments as well as individual stocks. On the other hand, the average investor, by nature, tends to be a long-term animal, and that means having to contend with both volatile whiplash swings as well as the fear of downside market risks. It has always been a maxim for me to take both volatility and downside risk into consideration when I am in investment mode. I have also come to believe that volatility does not always translate into higher returns. Diversification is a great tool for dealing with both volatility and downside risk. Vanguard Total Stock Market ETF The Vanguard Total Stock Market (NYSEARCA: VTI ) ETF is a significantly diversified proven winner. It seeks to track the performance of a benchmark CRSP U.S. Total Market Index. The investment approach is focused on: Large-, mid-, and small-cap equities diversified across growth and value styles. A passively managed, index sampling strategy. Maintaining a fully invested fund utilizing low expenses to minimize net tracking errors. Accurately representing the U.S. equity market while delivering low turnover. Key Fund Facts Clearly, a key fact for investors to consider is the expense ratio for purchasing the ETF. As of 04/28/2015 it is 0.05% and compares very favorably with the Lipper peer average expense ratio of 1.17% as of 12/31/2005. Total net assets are $389.8 billion as of 02/29/2016. Outstanding shares are 560,322,004 as of 03/31/2016. The risk and volatility Beta based on the 5 year Primary benchmark and the Broad-based benchmark is 1.00. Sector Weightings Courtesy of the Author As noted in the chart above, at present the heaviest sector weightings are in Financials, Technology and Consumer goods while the lowest are in Basic materials, Telecommunications and Utilities. Comparative Performance Courtesy of the Author Of the 13 funds listed in the table above, VTI leads the group with a ten year average return of 6.13% while maintaining a maximum level of diversification. The 3 and 5 year returns are 8.21% and 8.63%, respectively. Short-Term Performance The fund’s overview is described by the table below. It is highly capitalized and provides a 2.2% dividend yield as well as capital gains. Click to enlarge Courtesy of the Author Although VTI shows a loss for the first three months of this year and an -8.2% one-year return, it sports a 10% total market return for the last three years during a period of exceptional market volatility. Cumulative Long-Term Performance Click to enlarge Courtesy of the Author Long-term cumulative performance over 10 years is 97.52% with a cumulative performance of 133.12% since inception on 05/24/2001. VTI 5 Year Chart A 5 year weekly stock price chart shows strong performance. Extrapolating data from the chart shows a low close of 51.04 on October 3, 2011 and a close on April 4, 2016 of 105.04 for a share value gain of 51%. This corresponds to an approximate 5 year annual gain of 8.3% seen in the Betterment Comparative Performance chart provided above. Click to enlarge C ourtesy of the Author VTI Bounce-Back As Market Recovered Courtesy of the Author VTI showed a strong bounce-back in mid-February of 2016 following the volatile 10% market decline that took place during January 2016. Additional data supporting VTI which is also available as a mutual fund can be reviewed on the Vanguard site . Where Should We Be In The Market? Nobody can call the market; we can only consider economic variables and try to place ourselves in the best situation to profit from our investments, and most importantly, to avoid significant financial loss. We can also learn from past experience if we are in a position where we are personally vulnerable to the stressful impact of severe market swings. I am not sanguine in my near-term expectations that stock markets can continue to rise in the current cycle . I make no predictions, but point out the following for your consideration: U.S. Market Indices are nearing highs in a climate of weak global economic conditions. But, I cannot know what will happen in the longer term and therefore the choice of selling my portfolio and exiting the stock market is a poor choice in my opinion. I consider the U.S dollar to be the strongest currency and the U.S. economy to have the greatest potential to generate wealth given better economic policies. The question for all investors now is, where do you feel the most comfortable putting your money? Conclusion Remaining invested for the near term, in my opinion, requires the broadest diversification in the strongest companies, and I consider the U.S. the best place to be at this time. The Vanguard Total U.S. Market ETF may be a place for some investors to seek refuge. Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in VTI over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. Additional disclosure: The information and data that comprise the content of this article came from external sources that I consider reliable, but they have not been independently verified for accuracy. Although I reserve the right to express points of view, they are my reasoned opinions, and not investment advise. I am not responsible for investment decisions you make. Thank you for reading and commenting.

Singapore ETFs In Focus Following Policy Easing

In a surprise move, the monetary authority of Singapore (MAS) eased policies on April 14, 2016. The step was taken to boost economic growth which halted in the first quarter of 2016. Notably, the Singapore Monetary Authority uses currency as a key tool to ease monetary policy rather than interest rates and resorted to a flat slope, budging from the prior target of a 0.5% annualized gain in the currency. However, no changes were made to the center of the band or the width, which is usually +/- 2%, per barrons.com. The preliminary estimates revealed that the economy grew 1.8% year over year in the first quarter of 2016, maintain the pace seen in the previous two quarters and slightly above 1.7% growth expected by the market. Sequentially, growth was flat on a seasonally-adjusted annualized basis, declining from 6.2% growth recorded in the fourth quarter and falling shy of the market expectation of 0.2% growth . MAS expects the economy to expand more moderately over the rest of the year. External shocks due to the slowdown in its major trading partners caused the worry. And if this was not enough, consumer prices in Singapore declined in February for 16 months in a row. So, the authority had to react to arrest the downtrend and revive this export-centric economy. The move instantly lowered the value of Singapore dollar which recorded the biggest plunge in eight months. Many analysts are speculating further policy easing given the dour economic scenario. Market Impact Though Singaporean stocks and the related ETFs have surged so far this year, the recent central bank comments point to the fact that the economy is reeling under pressure. China Renminbi devaluation and the recent weakness in the U.S. dollar also acted as headwinds to the Singaporean currency. Export-centric Asian economies like Singapore were thus forced to depreciate their currencies to stave off competitive pressure (probably) and rev up their exports while growth issues in China marred investing prospects of countries with close trade ties. However, the present situation is a bit dicey with the monetary easing opening room for growth while submissive central bank comments making investors wary. So, it is better to stay on the sidelines at the current level, wait for some definite improvement and obviously better entry points. The large-cap fund covering this economy’s equity market – iShares MSCI Singapore ETF (NYSEARCA: EWS ) – had a solid stretch in the last three-month period (as of April 14, 2016) gaining 16.9%. It has a Zacks ETF Rank #3 (Hold). We have briefly highlighted the ETF tracking the country below. EWS in Focus EWS is easily the most popular Singapore ETF on the market as it has about $550 million in AUM and an average daily volume of 1.8 million shares a day. The product charges 47 basis points a year from investors. With 28 stocks in its basket, this fund from iShares puts more than 50% of its total assets in the top five holdings, suggesting higher concentration risks. The financial sector actually makes up roughly half of the portfolio, leaving around 18% for industrials followed by 14.5% for telecommunication. EWS pays a solid yield of 4.06% annually (as of April 14, 2016), implying that it may be an income pick if payout levels hold. Original Post

Inside WisdomTree’s New Dividend Growth ETF

Demand for safe-haven assets peaked amid an uncertain global economic outlook and growing volatility across many asset classes. With safe-haven assets in demand, dividend has been an area to watch out for as not all income products are devoid of risks. Stocks that are hiking dividend continuously are on the other hand said to be the best bets. Meanwhile, treasury yields are also showing a downtrend. Yield on 10-year Treasury notes fell by almost 44 bps to 1.80% as of April 14, 2016. This has made investors thirstier for yields lately (read: High Dividend Sector ETFs Hitting All-Time Highs ). Meanwhile, chances of the Fed hiking rates in the near-term have also dropped significantly after the Fed Chair Janet Yellen’s dovish comments, which were further reinforced by Fed Bank of New York President William C. Dudley. Dudley said that due to uncertain outlook for the U.S. economy, a cautious and gradual approach to interest-rate increases is expected. Yield on Japan’s benchmark 10-year government bond has been hitting record lows after it slid to sub-zero for the first time in February. Bank of Japan introduced negative interest rates earlier this year following the European Central Bank (ECB) footsteps. Denmark, Sweden and Switzerland adopted similar measures. Meanwhile, in March, the ECB came up with a more intensified economic stimulus and opted for multiple rate cuts and the expansion of its quantitative easing program to boost the economy. Monthly asset purchases were raised to EUR 80 billion from 60 billion previously (read: Surprise ETF Winners & Losers Post ECB Easing ). Because of these factors, dividend ETFs have gained a lot of popularity as investors continue to search for attractive and stable yield in this ultralow rate interest environment. Probably, this is why WisdomTree recently rolled out a dividend growth ETF targeting international economies. In fact, the global footprint made the fund more attractive given the ultralow interest rate backdrop prevailing in most developed economies. Below, we have highlighted the newly launched fund – WisdomTree International Quality Dividend Growth Fund (BATS: IQDG ) . IQDG in Focus IQDG tracks the WisdomTree International Quality Dividend Growth Index, which provides exposure to dividend paying developed market companies. Index comprises 300 companies from the WisdomTree International Equity Index selected on the basis of both growth factors – long-term earnings growth expectations and quality factors – three-year historical averages for return on equity and return on assets, which are then weighted on the basis of annual cash dividends paid. The fund has a net expense ratio of 0.38%. However, the net expense ratio reflects a contractual waiver of 0.1% through July 31, 2017. As of April 13, 2016, the fund had 207 dividend-paying companies from the developed world, excluding Canada and the U.S. in its basket. The fund is well diversified with none of the stocks holding more than 4% except the top two holdings, British American Tobacco plc (NYSEMKT: BTI ) (5.3%) and Roche Holding AG ( OTCQX:RHHBY ) (4.9%). From a country perspective, U.K. takes the top spot with about 19.4% of the basket followed by Japan (14%), Switzerland (10.1%), Germany (7%) and the Netherlands (6.9%). As for a sector point of view, Consumer Staples dominates the fund with about 22.7% exposure, followed by Consumer Discretionary and Industrials with 18.7% and 16.4% allocation, respectively. Launched on April 7, the fund has already amassed $2.5 million in its asset base. The fund is up 3.5% in the last 5 days. How Could it Fit in a Portfolio? The ETF could be well suited for investors looking for higher dividend paying securities across the globe. It also offers diversification benefits. These low-risk vehicles are excellent options for investors looking to protect their portfolio in a bearish environment. With interest rates being low in most developed nations, the appeal of dividend ETFs has increased as these offer strong yields. However, investors looking for high growth may not be satisfied with this product. Additionally, changes in currency exchange rates may affect the value of the fund’s investment adversely. Competition The ETF could face competition from other dividend ETFs with a global perspective. There are quite a few international dividend ETFs which specifically target this market. Of these, the popular fund, the iShares International Select Dividend ETF (NYSEARCA: IDV ) , has a total asset base of $2.6 billion. This fund tracks the Dow Jones EPAC Select Dividend Index and trades in heavy volume of 911,000 shares per day and charges 50 bps in annual fees. Another fund targeting the international dividend market space, the SPDR S&P International Dividend ETF (NYSEARCA: DWX ) , has AUM of nearly $856.8 million and exchanges 190,000 shares a day. The fund has an expense ratio of 45 bps. Apart from these, IQDG could also face competition from the FlexShares International Quality Dividend Index ETF (NYSEARCA: IQDF ) with an asset base of $342 million and the PowerShares International Dividend Achievers Portfolio ETF (NYSEARCA: PID ) with AUM of $700.1 million. IQDG looks attractive with a lower expense ratio as compared to IDV and DWX. The fund has a chance of making a name for itself if it manages to generate returns net of fees greater than the currently available products in this ETF space. IQDG’s focus on selecting high dividend paying stocks with both quality and growth looks to be a great strategy. Link to the original post on Zacks.com Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.