Opinion

John Wasik

Will you get burned by following the hot money in ETFs?

Jul 21, 2014 16:26 UTC

CHICAGO (Reuters) – All too often, I see investors heading in the wrong direction en masse. They buy stocks at the top of the market or bonds when interest rates are heading up.

Occasionally, though, active investors may be heading in the right direction. A case in point has been the flow of money into certain exchange-traded funds in the first half of this year.

Reflecting most hot money trends, billions of dollars moved because of headlines. The Energy Select SPDR exchange-traded fund, which I discussed three weeks ago, gathered more than $3 billion in assets in the first half, when crude oil prices climbed and demand for hydrocarbons remained high.

The Energy SPDR, which charges 0.16 percent for annual management expenses and holds Exxon Mobil Corp, Chevron Corp and Schlumberger NV, has climbed 22 percent in the past 12 months, with nearly one-third of that gain coming in the three months through July 18. Long-term, this may be a solid holding as developing countries such as China and India demand more oil.

“We think the Energy Select SPDR is a play of oil prices remaining high and supporting growth for integrated oil & gas and exploration and production companies,” analysts from S&P Capital IQ said in a recent “MarketScope Advisor” newsletter.

U.S. transportation stocks for the long haul

Jul 7, 2014 17:44 UTC

CHICAGO (Reuters) – As North Americans hit the highways, airports and rails for vacations this summer, it’s not hard to believe that some of the most robust stocks are in the transportation industry – particularly in an improving economy. Transportation stocks have proven to be long-haul winners and essential cogs in any growth portfolio.

Transportation company performance is generally a bellwether of an economy’s health. When consumer and industrial demand is rising, the greater the need to ship raw materials and finished products from various points of the globe.

On the retail side, a combination of higher demand and the conflict in Iraq ratcheted up U.S. gasoline prices to the highest level in six years this past Fourth of July weekend, according to the American Automobile Association. Despite the higher prices, some 35 million Americans hit the road during the holiday weekend for trips of 50 miles or more.

Finding a soft landing when bond prices fall

Jun 30, 2014 16:45 UTC

CHICAGO, June 30 (Reuters) – Contemplating the end of a
30-year bull run in bond prices is a bit like waiting to go to
the dentist for some long-needed procedure. You know it needs to
happen, but you procrastinate.

The end of the bond rally has been telegraphed for more than
a year, so it needn’t be painful if you prepare for it now.

Some of the conventional wisdom on avoiding all bonds except
for short-maturity issues may be flawed. There are alternatives
that can make sense while producing modest yield.

Energy scare good for oil stocks in the short term

Jun 23, 2014 17:10 UTC

CHICAGO (Reuters) – Despite the incendiary conflict in Iraq that last week sent the benchmark price of Brent crude oil to more than $115 a barrel, a nine-month high, U.S. stock markets largely shrugged off the oil threat, hitting record closing highs last week.

For investors, a new energy crisis in the Middle East presents something of an opportunity, albeit a fragile, short-term one.

Energy production has become much more geographically diverse, particularly in the United States. That lessens the severity of a Mideast production shortfall while boosting the long-term prospects of investment in fossil-fuel companies.

The score on Brazil as a long-term investment

Jun 16, 2014 15:07 UTC

CHICAGO (Reuters) – The beginning rounds of the World Cup have offered thrills to global soccer fans. But what should excite investors about Brazil?

The South American country is brimming with natural resources and growth possibilities. Despite concerns about its growth slowdown and its preparations for the upcoming Olympics, the country can be a good holding if global population growth remains on course.

There are more than a dozen exchange-traded funds (ETFs) that hold Brazilian stocks exclusively. They vary from broad-based index funds to specialized ETFs that use leverage to amplify market moves.

Finding wiser choices in smart beta funds

Jun 9, 2014 16:41 UTC

CHICAGO, June 9 (Reuters) – Ever since the dot-com crash
more than a decade ago, Wall Street and the mutual fund industry
have been on a relentless push to plug “smart” beta funds, also
known as “alternative” or “strategic beta” products. The funds
promise reasonable returns with lower risk by focusing on older,
steadier companies with consistent dividends.

But pursuing a smart-beta strategy isn’t as simple as just
buying a fund with that name and thinking it will outperform
conventional index funds. There’s always a trade-off in costs,
risk and return, so you need to dig much deeper to get beyond
simplistic marketing pitches.

For example, let’s say you were seeking an alternative
strategy and were sour on the 150 or so S&P 500 index funds on
the market that weight their stock holdings by the popularity or
market valuation of the stocks within the index.

What’s the best basket for global stocks?

Jun 2, 2014 15:49 UTC

CHICAGO (Reuters) – A stimulative monetary program in Europe and the U.S., combined with continued growth in Asia, are proving to be a potent trio for global investors.

But you have to be selective with mutual- and exchange-traded funds to ensure you have a broad basket for capturing global returns.

If you already have funds that represent the bulk of the U.S. stock market, you don’t need to duplicate those companies in a global portfolio. Funds that stipulate “ex-U.S.” – that is, they exclude U.S. stocks – can ensure you’re well positioned outside of America.

Column – Another BRIC in the wall: India primed for growth

May 27, 2014 21:28 UTC

CHICAGO (Reuters) – Although the world’s largest democracy has been hobbled by inflation, a declining currency and difficult business environment, the pro-business Bharatiya Janata Party that just won an epic election in India has engendered optimism that the country can turn around its sagging economic scenario.

It’s time to increase your exposure to India’s stock market.

The timing is good with equities in India perking up of late, something that isn’t happening in the other “BRIC” emerging markets of Brazil, Russia and China.

The $1 billion WisdomTree India Earnings ETF, the largest exchange-traded fund investing in Indian stocks, has climbed 27 percent over the past 12 months through May 23 and is up 31 percent year-to-date. The fund holds large companies such as Reliance Industries Ltd, Infosys Ltd and Tata Motors Ltd. It charges 0.83 percent for annual management expenses.

Another BRIC in the wall: India primed for growth

May 27, 2014 20:07 UTC

CHICAGO (Reuters) – Although the world’s largest democracy has been hobbled by inflation, a declining currency and difficult business environment, the pro-business Bharatiya Janata Party that just won an epic election in India has engendered optimism that the country can turn around its sagging economic scenario.

It’s time to increase your exposure to India’s stock market.

The timing is good with equities in India perking up of late, something that isn’t happening in the other “BRIC” emerging markets of Brazil, Russia and China.

The $1 billion WisdomTree India Earnings ETF, the largest exchange-traded fund investing in Indian stocks, has climbed 27 percent over the past 12 months through May 23 and is up 31 percent year-to-date. The fund holds large companies such as Reliance Industries Ltd, Infosys Ltd and Tata Motors Ltd. It charges 0.83 percent for annual management expenses.

For investors, coal brings lumps

May 19, 2014 16:40 UTC

CHICAGO, May 19 (Reuters) – If you care about the
environment, you can emulate Stanford University’s move to
remove coal-producing companies from its endowment portfolio by
purging fossil fuel companies from your own investments,
although it will take a customized strategy.

Despite its role in climate change and air pollution, coal
may remain in favor because it’s still relatively cheap to mine
and burn compared to alternative forms of energy in most
developing countries.

In recent years, though, coal has hardly been the darling of
the volatile U.S. energy sector. Faced with lower natural gas
prices, a boom in North American oil and methane production and
growing competition from wind and solar power, companies that
mine the black mineral have been suffering in recent years.

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