Archive for July, 2012
ETF In Focus: Guggenheim S&P 500 Equal Weight Consumer Discretionary ETF (RCD)
Posted by Matthew Sauer, Esq.
ETF Report subscribers will notice a number of new and exciting changes in their newsletter. In an effort to further improve the value of this monthly publication, we have increased the size of the newsletter to 16 pages. With four more pages of real estate, we can monitor hundreds of new products. Last week, we highlighted the SPDR S&P Russia ETF (RBL). This week, we will continue with this theme, shedding light on another newsletter newcomer. This time, the spotlight turns to the Guggenheim S&P 500 Equal Weight Consumer Discretionary ETF (RCD). Designed to provide investors with a unique take on the companies responsible for providing shoppers with “wants,” rather than “needs,” RCD may be an attractive option for risk tolerant individuals looking to enhance their exposure to the consumer. There are plenty of funds available that provide investors with dedicated access to discretionary names. RCD, however, has managed to carve out a niche thanks to its unique indexing strategy. Whereas the popular Consumer Discretionary Select Sector SPDR (XLY) targets the sector using a market-cap weighting strategy, RCD applies an equal-weighted strategy. By paring back the influence of major players in the industry, the fund allows smaller companies to make a larger impact on the fund’s day-to-day action. The difference can be seen in comparing the two products’ top holdings. Whereas XLY’s number one holding, McDonald’s (MCD), represents over 6.5% of the fund’s portfolio, RCD’s top component, Cablevision (CVC), account for less than 2% of its assets. During periods of market volatility, the added diversification that comes with an equal-weighted fund may provide some welcomed relief. RCD is unique, but should still be approached with caution. With an average trading volume under 15,000, the fund may be susceptible to liquidity-related issues. If you would like more information on the unique proprietary rating system used in our newsletter, please call us at (800) 548-3797 and an adviser would be happy to speak with you. Historical Performance (as of 7/30/12) YTD 1 year 3 years (Annualized) 5 years (Annualized) RCD 10.32 7.09 21.24 3.72 MSCI World NR USD 7.56 -1.72 8.77 -2.20 Consumer Cyclical 11.01 4.23 18.58 4.45 Past performance is no assurance of future results. Top 10 Holdings (as of 7/30/12) Represents 14.32% of total portfolio; 81 holdings total CABLEVISION SYSTEMS CORP PULTE HOMES, INC. NEWS CORPORATION EXPEDIA INC GAP INC WHIRLPOOL CORPORATION D.R.HORTON, INC. LIMITED BRANDS, INC. URBAN OUTFITTERS INC MATTEL INC Volume, Assets, and Expenses The Guggenheim S&P 500 Equal Weight Consumer Discretionary ETF has an average trading volume of 14 thousand and approximately $47 million in assets under management. It has an expense ratio of 0.50%. ETF Report’s Power Rankings Power Index: 73 Power Trend: Negative Recommendation: Hold
3 ETFs to Watch This Week
Posted by Matthew Sauer, Esq.
Here are 3 ETFs to watch this week: iShares Gold Trust (IAU) Between Europe’s ongoing sovereign debt drama, China’s slowing economic growth, and the recent series of less-than-inspiring macro data coming out of the United States, the current market environment is at no loss for drama. Nevertheless, precious metals are still struggling to find any semblance of strength. Gold has been particularly disappointing. After the impressive year that was 2011, many investors likely expected the yellow metal to continue along its largely unstoppable upward path. This has not been the case, however. Year to date, the bullion-tracking IAU has gained less than 5%. This may change, however, as Fed Chairman, Ben Bernanke and the FOMC prepare to the statement from this week’s policy meeting. In the past, we have seen gold and other precious metals react dramatically to the monetary authority’s policy stance. Talk of new rounds of quantitative easing would be a particularly welcomed development for gold watchers. Many turn to gold as a way to protect themselves from the threat of inflation. We are not encouraging long term investors to dive into gold at this time. Rather, funds like IAU and the SPDR Gold Shares (GLD) should be watched from the sidelines. 2012 has shown how quickly a rally can run out of steam. iShares MSCI Israel Capped Investable Market Index Fund (EIS) With titans like General Electric (GE), Apple (AAPL), Exxon Mobil (XOM), and Google (GOOG) out of the way, second half of earnings season is off to a relatively quiet start for the United States. Overseas, however, the action is far from reserved. Israel, for instance, will be a notable focal point with pharmaceutical giant, Teva Pharmaceuticals (TEVA) scheduled to release its performance numbers and outlook on Thursday. The size and influence of Teva is exemplified by its placement within EIS. Alone, the firm accounts for more than a quarter of the fund’s total portfolio. Fellow top holdings, Nice Systems (NICE) and Bezeq, the Israeli Company for Communications will step up to the plate on Wednesday and Thursday respectively. These two companies represent an additional 9% of the fund’s assets. While earnings action is sure to make EIS an interesting product to watch, investors must exercise caution here. Excessive exposure to top-heavy funds can leave a portfolio vulnerable to shake ups. Any time investors venture into a new ETF, it is crucial to have a full understanding of the holdings under the hood. iPath S&P 500 VIX Short Term Futures ETN (VXX) The past few weeks have left even the most hardened bull questioning his or her optimism. In looking at the recent action seen from volatility-tracking exchange-traded products, however, one would believe that things are quiet. Since locking in summer highs in early-June, the VIX-tracking VXX has stuck to a largely uninterrupted downward path. In fact, the ETN kicked off the start of the week hovering around all-time lows. VXX, like other VIX exchange-traded products, are not for the faint of heart. However, in looking at its recent dismal performance, even those with a stomach for risk may want to consider looking elsewhere. It is unclear as to what will eventually inspire this product and drive it higher. Clearly, Europe’s saga, the U.S.’s struggles and weakness in the emerging markets are failing to do the trick. If you would like to know which funds make up our newsletter model portfolios, please call us at (800) 548-3797.
Get Smart About Life Insurance
Posted by Matthew Sauer, Esq.
When you’re a young or mid-career worker, you need a life policy to replace your salary or other earnings if you die prematurely. Such insurance should be sufficient to protect your current and future financial commitments, which might include raising and educating children. Many people believe that retirement puts an end to any need for a life policy–but that’s often not the case. Now that you’re older, your commitments have changed–but they haven’t disappeared. For example, you might need to make sure that you have sufficient income to support a spouse if you die. Some retirees also have commitments to children who are not financially independent, including disabled children or young children from a marriage that occurred relatively late in life. Finally, you might wish to leave an estate behind to give a leg up to future generations or to support your favorite charitable institutions. A life policy during retirement can help ensure that you have the resources to meet all your current goals and commitments–even if you pass away prematurely. Without such coverage, you could leave your loved ones in the lurch. For example, Social Security and other pension benefits may decline significantly upon the death of one partner. When one spouse of a retired couple dies, the survivor’s Social Security or pension benefits may decline by as much as 50 percent . Such declines might mean that a surviving spouse will be forced to make painful financial adjustments. For example, he or she might need to trade down to a less expensive home or apartment–which could be especially painful during a time of bereavement. Some retirees also have young or even grown children who would find themselves in trouble without financial support. Such children might have special financial needs. For example, you might want to help a son or daughter who is still in professional school. A life policy might also allow you to continue providing assistance to a child who has suffered financial difficulties or setbacks due to health problems or other reasons. And life coverage can be essential to protect the well- being of a mentally or physically disabled child. Many retirees also rely on a life policy to provide a legacy for children or other heirs. Such a legacy might be designed to help meet educational costs for grandchildren. Some grandparents may also wish to leave additional money. For example, the right life policy might help your grandchildren make down payments on their first homes–a difficult hurdle for a young person these days. Life coverage can help you meet charitable goals. Such plans might include donating modest or more significant sums to one or more of your favorite charities. Alternatively, you might be able to leave enough to start a small family foundation. Such foundations are a great way to bring family members together and dedicate resources to improving the life of your community or the world at large–a wonderful gift to your family and the future. Finally, life coverage can pay off liabilities and cover special expenses associated with funerals and the like.