Friday Financial Five – March 22th, 2013

Friday, March 22, 2013

Dan Forbes, GoLocalProv Financial Expert

Despite ever increasing inflows, most investors are still getting used to the availability of Exchange-Traded Funds (ETFs) as portfolio options. Charles Schwab, Vanguard, and others continue to roll out funds while Fidelity is finally entering the market. According to Lipper, almost half of these funds have less than $50 million in assets and many are below $30 million. It might not make sense to have a portfolio entirely comprised of ETFs, but you should consider the stalwarts that have a history of performance. Here are five holdings in different asset classes and offered by five different companies for further consideration.

Fixed Income - PIMCO Total Return (BOND)

It was a matter of time before the bond giant turned the world’s largest mutual fund into an ETF option. After a tepid beginning, the ETF had a solid 2012. The lower total dollar amounts allowed for increased maneuverability, but huge inflows might prohibit that advantage in the future.

Emerging Markets - Vanguard FTSE Emerging Markets (VWO)

Most active emerging markets funds have higher internal fees due to the cost of research. Some do provide consistently above market returns to justify those fees. In a battle to lower ETF fees, the extremely popular VWO, a passive option, recently changed its index from the MSCI to the FTSE group.

Large Growth - iShares Core S&P 500 (IVV)

There is an argument to be made that if an investor is simply looking for market returns, a passive S&P index fund is all that’s needed. That logic makes this the most largely held type of ETF, owned by investors who don’t see an advantage to actively traded management. Again, there have been large company fund managers that have outperformed the S&P for extended periods of time, but this ETF allows a buy and forget it philosophy.

Fixed Income - Guggenheim Bulletshares ETFs (Various)

Those with more modest portfolios might be skittish about committing big dollars to individual bond holdings. The Bulletshares allow a more diversified approach to bond investing while also using targeted years to hedge against rising interest rates. The price paid for these ETFs can hamper returns so research and diligence must prevail when considering their use.

Commodities - SPDR Gold Shares (GLD)

For those seeking to add precious metals to a traditional 60/40 mix, the largest selection is currently GLD. Gold has had a tremendous run, as the ETF tries to replicate the price of gold bullion. It’s very difficult to gauge the risk of the asset as it’s considered non-correlated to traditional stock and bond holdings.

Dan Forbes is a regular contributor on financial issues. He is a CFP Board Ambassador. He leads the firm Forbes Financial Planning, Inc in Providence, RI and can be reached at dforbes@forbesplanning.com.

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Friday Financial Five – March 22th, 2013

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