Vanguard ETF: | 7.4%* | ||
Diversified Core: | 8.1%* | ||
Six Core Asset ETFs: | 7.3%* |
Articles on FRN
- WisdomTree Emerging Market Small Cap ETF Enables Diversification
06/16/2011
Emerging market stocks have been recognized as an important asset class for diversification purpose for a long term retirement investing portfolio. Small company stocks in emerging economies offer even higher growth in this asset class. The small cap shares are usually those which have relatively small market capitalization usually ranging between $ 300 million to $ 2 billion.
It is thus important to study these ETFs more carefully before investing. In this article, we present more detailed study on WisdomTree Emerging Market ETF (DGS).The following table lists three most liquid small cap ETFs in this asset class.
Emerging Market Small Cap
06/10/2011
Description Symbol 1 Yr 3 Yr 5 Yr Avg. Volume(K) 1 Yr Sharpe SPDR S&P Emerging Markets Small EWX 18.27% 3.74% NA 119 104.22% Wisdomtree Emerging Mkts Small DGS 33.94% 11.31% NA 129 166.6% Guggenheim Frontier Markets FRN 19.43% NA NA 72 108.31%
For information on more ETF performance, please refer to here.From the above table clearly DGS is leading the other in terms of longevity and in terms of returns of one year. Compared with broad base emerging market index ETF (DGS), its three year annualized return 11.31% is way above the EEM's annualized return (about 0%). The inception date of the fund is 8/1/2007. 64% of the fund iin small cap shares.
DGS has also a unique diversification in the emerging market. Please see the following table for its holding percentages among countries as of 6/06/2011.
1. Taiwan
20.97%
2. South Korea
11.24%
3. South Africa
9.65%
4. Thailand
9.61%
5. Brazil
8.95%
6. Israel
7.21%
7. Turkey
6.88%
8. Malaysia
5.31%
9. China
5.00%
10. Chile
4.17%
11. Philippines
3.18%
12. Indonesia
2.34%
13. Mexico
2.25%
14. India
1.25%
15. Poland
0.52%
16. Argentina
0.33%
17. United States
0.15%
Please also find below the sector wise diversification of DGS as on 06-06-2011.
Sector
Weight
1. Industrials
21.40%
2. Financials
18.47%
3. Consumer Discretionary
16.38%
4. Information Technology
11.54%
5. Materials
10.19%
6. Consumer Staples
7.71%
7. Utilities
6.67%
8. Health Care
2.95%
9. Energy
2.38%
10. Other
2.08%
One of the biggest advantages of investing in small-cap stocks is to exploit market inefficiency: the opportunity to beat institutional investors.Many small cap companies are not well researched. This is more true for emerging market small companies. Since DGS offers a systematic way to invest in a broad basket of small compaines in these regions, it is an effective to gain exposure in this important asset class and derive higher returns.
Disclaimer: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical
Symbols: EEM, DGS, FRN, EWX, VWO, ETFs, Asset Allocation
Exchange Tickers: (EEM), (DGS), (FRN), (EWX), (VWO)
- Emerging Market Small Cap: An investment with High Risk But Rapid Returns
05/05/2011
Emerging markets operate new environments, with new challenges and unique models for investment. Despite the risk and the toughness, emerging markets have an interesting potential to grow rapidly. Small Cap emerging market funds are going to be the some of the fastest growing but potentially most volatile of the emerging market alternatives.
Emerging Market Small Cap
04/29/2011
Description
Symbol
1 Yr
3 Yr
5 Yr
Avg. Volume(K)
1 Yr Sharpe
Wisdomtree Emerging Mkts Small
27.65%
11.91%
NA
179
121.55%
Guggenheim Frontier Markets
15.44%
NA
NA
139
77.14%
SPDR S&P Emerging Markets Small
11.76%
NA
NA
141
57.65%
Wisdomtree Emerging Mkts Small (DGS) has this time a strong returns, investing the major part of the fund in the Industrial, Financial, and Consumer Discretionary Sector (22%, 28% and 17.5%, respectively). This fund invest mostly in Taiwan, Korea, South Africa and Thailand.
Following, the Guggenheim Frontier Markets ETF (FRN), which 80% of the assets of the fund is invested in American depositary receipts ("ADRs") and global depositary receipts ("GDRs"). The investments are made in what is called “Frontier Markets”, with the participation of developing markets such as Chile, Colombia and Egypt.
Finally, SPDR S&P Emerging Markets Small Cap (EWX) has the lowest figures among the three showed. This fund invest in Emerging Markets included in the S&P Global BMI Index, tracking all the stocks in developed and emerging markets with float-adjusted market capitalization of at least $100 million.
Major Asset Classes Trend
04/29/2011
Description
Symbol
1 Week
4 Weeks
13 Weeks
26 Weeks
52 Weeks
Trend Score
Gold
3.84%
9.46%
16.96%
14.89%
32.08%
15.45%
Commodities
0.6%
3.84%
13.56%
26.69%
30.52%
15.04%
US Equity REITs
3.07%
5.58%
10.39%
15.42%
22.62%
11.42%
International REITs
2.78%
5.26%
8.35%
10.35%
28.26%
11.0%
US Stocks
2.01%
2.4%
7.85%
18.72%
19.58%
10.11%
Emerging Market Stks
-0.22%
1.71%
9.98%
12.03%
24.84%
9.67%
International Developed Stks
2.24%
4.63%
7.69%
12.36%
17.73%
8.93%
International Treasury Bonds
2.13%
4.92%
7.23%
4.15%
15.65%
6.82%
US High Yield Bonds
0.47%
1.72%
3.59%
7.88%
14.77%
5.68%
Frontier Market Stks
1.76%
3.07%
4.61%
-2.58%
16.42%
4.66%
US Credit Bonds
0.82%
1.63%
2.31%
0.68%
6.89%
2.47%
Emerging Mkt Bonds
0.75%
1.2%
3.07%
-2.83%
8.87%
2.21%
Mortgage Back Bonds
0.71%
1.15%
1.49%
0.91%
4.89%
1.83%
Total US Bonds
0.65%
1.34%
1.47%
-0.02%
5.4%
1.77%
Intermediate Treasuries
1.08%
1.62%
1.07%
-2.91%
7.4%
1.65%
Municipal Bonds
0.98%
2.22%
3.32%
-1.75%
1.43%
1.24%
Treasury Bills
-0.01%
0.03%
0.08%
0.1%
0.17%
0.07%
Analyzing the major assets class trend, it can be seen that the stocks in the Emerging Markets (VWO)have an interesting trend score, taking a strong position in the middle top table, with figures closer to the US Stocks (VTI).
Emerging Markets Small Capitalization represent a good investment for those who do not have problems on risking some money in the short term, and are willing to produce high yields taking into account a smaller period of time.
Symbols: DGS, FRN, EWX, VTI, VWO
Exchange Tickers: (NYSE: DGS), (NYSE: FRN), (NYSE: EWX), (NYSE: VTI), (NYSE: VWO)
Disclaimer: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
- Emerging Market Small Cap ETFs Show Promising Growth as Investors Look to Diversify
05/05/2011
As the international economy has become more intertwined, many investors have sought out exposure to a wider range of geographic markets. Emerging Market Small Cap ETFs provide investors access to growing companies in the world's growing economies. While emerging market investments come with inherent risks, they also come with more upside potential, as companies in these markets often have more room for growth than firms in more developed nations.
In recent periods, capital inflows to developing economies have increased as investors move away from established economies that have encountered economic difficulty or low growth levels. This reallocation of capital has resulted in strong growth for ETFs that track Emerging Market Small-Cap Equities. Among these ETFs, the Wisdomtree Emerging Markets Small Cap ETF (DGS) has lead the way, returning 27.65% in the past year. Other high level performers include the Guggenheim Frontier Markets (FRN) and the SPDR S&P Emerging Markets Small Cap ETF (EWX), offering investors returns of 15.44% and 11.76% respectively.
Emerging Market Small Cap
4/29/2011
Description Symbol 1 Year Average Volume (K) Wisdomtree Emerging Mkts Small DGS 27.65% 179 Guggenheim Frontier Markets FRN 15.44% 139 SPDR S&P Emerging Markets Small EWX 11.76% 141 As mentioned, the most successful ETF in the class in the past year has been Wisdomtree's Emerging Markets Small Cap ETF (DGS). This ETF seeks to track the price and yield performance of the Wisdomtree Emerging Markets Small Cap Dividend Index and attempts to invest all of its assets in the stocks that make up the index. DGS is well diversified across numerous sectors. Below are the sectors making up over 10% of the total weighting for the Wisdomtree's Emerging Markets Small Cap ETF (DGS):
- Industrials (19.94%)
- Consumer Cyclical (19.11%)
- Technology (14.36%)
- Financial Services (12.72%)
- Basic Materials (10.43%)
With the continued growth of many emerging economies, a strong argument can be made for investors to have a dedicated portion of their portfolios invested in Emerging Market Small Cap ETFs. While these investments certainly come with risks, the potential reward should be enough to keep most investors on board.
Disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
- Earthquakes and Wars Call for Diversification and Tactical Asset Allocation in Investing
03/20/2011
Investing for wealth preservation and growth or for retirement purpose is by definition a long term process. In a long term period, experiencing wars, natural disasters and political or social unrests is a fact of life. How to deal with and navigate through these threatening events is pertinent to the success to achieve financial goals.
As baby boomers are exiting or getting ready to exit the work force, this year suddenly saw many dramatic events unfolding: Japan's earthquake and the still unfolding nuclear power meltdown events, the middle east violence with fear of radical islamic involvement and, this weekend's airstrike by allied forces on the Libyan regime are all pointing to certain tipping points in the world economic and political landscape. The new generations and the baby boomers suddenly find themselves in a world with entangled dangerous events.
The events certainly made their marks on financial markets: the big swings of the Dow Jones Industrial stocks (DJI) and S&P 500 stocks (SPY) left a dent on the otherwise stubborn euphoric markets. Most risk assets including U.S. stocks (SPY) (VTI), international stocks (EFA) (VEU), emerging market stocks (EEM) (VWO) and REITs (IYR) (VNQ) (RWX) lost ground in the last week. The only standout in the group is commodities (DBC) (GSG). For the week, DBC actually gained 0.78% while gold (GLD) gained 0.11%. For more detailed performance information, please refer to here.The key to succeed in long term investing lies in adopting sound and consistent (thus long term) strategies in managing one's portfolios. Buy and hold of a basket of major assets with properly calculated risk tolerance is one way. A more maverick way can enhance return with lower risk by adopting some tactical moves in asset allocaiton. Let's first review the following portfolios using a strategic asset allocation (buy and hold among equal weights on risk assets):A. Three Core Asset ETF Benchmark Strategic Asset Allocation Moderate (US Equity (VTI) (SPY), International Equity (VEU) and Fixed Income (BND))B. Four Core Asset ETF Index Funds Emerging Markets Strategic Asset Allocation Moderate (additonal Emerging Market Equity (VWO) (EEM))C. Five Core Asset ETF Benchmark Strategic Asset Allocation Moderate (additional US REITs (VNQ) (IYR) added)D. Five Core Asset ETF With Commodity Benchmark Strategic Asset Allocation Moderate(additional commodities (DBC) added to the four asset portfolio)E. Six Core Asset ETFs Strategic Asset Allocation Moderate (include US Equity, International Equity, Emerging Market Equity, REITs, Commodities and Fixed Income)
Portfolio Performance Comparison
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Three Core Asset ETF Benchmark Strategic Asset Allocation Moderate 10% 69% 3% 13% 4% 14% Six Core Asset ETFs Strategic Asset Allocation Moderate 11% 89% 4% 17% 7% 31% Four Core Asset ETF Index Funds Emerging Markets Strategic Asset Allocation Moderate 9% 70% 4% 17% 6% 26% Five Core Asset ETF With Commodity Benchmark Strategic Asset Allocation Moderate 11% 85% 3% 12% 6% 29% Five Core Asset ETF Benchmark Strategic Asset Allocation Moderate 11% 76% 4% 16% 5% 19%
For the week, Six Core Asset ETFs Strategic Asset Allocation Moderate lost 0.34% compared with 0.66% loss of Five Core Asset ETF Benchmark Strategic Asset Allocation Moderate or 0.68% loss of Three Core Asset ETF Benchmark Strategic Asset Allocation Moderate. With the smaller loss of REITs and the commodity performance, diversification does show its advantage during the market stress.The last ten years experienced two major economic downturns: the technology bubble burst in 2000-2002 and the financial bubble burst in 2008-2009. The pure buy and hold strategy, even with proper diversification, does not shield its portfolios from big loss. A more active portfolio strategy such as this tactical asset allocation strategy (TAA) can be used. The following again compares the five portfolios with 3,4,5,6 assets using TAA. All of them are moderate risk portfolios.
Portfolio Performance Comparison
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe Three Core Asset ETF Benchmark Tactical Asset Allocation Moderate -3% -32% 2% 16% 4% 28% Six Core Asset ETFs Tactical Asset Allocation Moderate 9% 67% 10% 78% 14% 96% Four Core Asset ETF Index Funds Emerging Markets Tactical Asset Allocation Moderate -2% -16% 7% 62% 10% 64% Five Core Asset ETF With Commodity Benchmark Tactical Asset Allocation Moderate 2% 18% 5% 43% 10% 64% Five Core Asset ETF Benchmark Tactical Asset Allocation Moderate 6% 42% 7% 60% 10% 63% The six asset portfolio with TAA actually had a slight gain in the last week and it is also positive in the last month. This clearly illustrates that tactical asset allocation over a diverse array of major assets can be effective.The following table shows the trend scores of major assets ending 3/18/2011.Assets Class Symbols 03/18
Trend
Score03/11
Trend
ScoreDirection Commodities DBC 14.15% 12.94% ^ Gold GLD 8.86% 9.46% v US Equity REITs VNQ 5.89% 8.03% v US Stocks VTI 5.55% 8.03% v International Treasury Bonds BWX 5.07% 4.04% ^ International REITs RWX 4.27% 6.89% v US High Yield Bonds JNK 3.74% 4.13% v Emerging Market Stks VWO 2.97% 4.64% v Intermediate Treasuries IEF 1.82% 1.16% ^ US Credit Bonds CFT 1.71% 1.71% v Total US Bonds BND 1.12% 0.97% ^ International Developed Stks EFA 0.87% 3.28% v Emerging Mkt Bonds PCY 0.57% 1.18% v Mortgage Back Bonds MBB 0.23% 0.12% ^ Treasury Bills SHV 0.05% 0.05% v Municipal Bonds MUB -0.9% -1.22% ^ Frontier Market Stks FRN -3.22% 1.01% v In conclusions, no one has a crystal ball to predict the future. The effective way to cope with major risks for mankind is to adhere to sound portfolio strategies such as asset allocation with diversification and tactical allocation based on prevailing events.
Symbols:EEM,VNQ,FRN,VWO,IYR,ICF,GLD,RWX,VTI,SPY,IWM,PCY,EMB,JNK,HYG,PHB,EFA,VEU,IEF,TLT,GSG,DBC,DBA,CFT,BWX,MBB,BND,MUB,SHV,AGG ,Exchange,Tickers,(NASDAQ,EEM),(NASDAQ,VNQ),(NASDAQ,FRN),(NASDAQ,VWO),(NASDAQ,IYR),(NASDAQ,ICF),(NASDAQ,GLD),(NASDAQ,RWX),(NASDAQ,VTI),(NASDAQ,SPY),(NASDAQ,IWM),(NASDAQ,PCY),(NASDAQ,EMB),(NASDAQ,JNK),(NASDAQ,HYG),(NASDAQ,PHB),(NASDAQ,EFA),(NASDAQ,VEU),(NASDAQ,IEF),(NASDAQ,TLT),(NASDAQ,GSG),(NASDAQ,DBC),(NASDAQ,DBA),(NASDAQ,CFT),(NASDAQ,BWX),(NASDAQ,MBB),(NASDAQ,BND),(NASDAQ,MUB),(NASDAQ,SHV),(NASDAQ,AGG),
Disclosure:
MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
- 'Safe' Assets' Trends Back to Positive: Risk Aversion Began?
03/14/2011
Risk assets' correction in last week was across the board: virtually all risk assets, other than US REITs (VNQ), turned up negative. Among them, both international stocks (EFA) and commodities (DBC) had the largest drops: both lost 3.09%. On the other hand, most 'safe' assets had a positive week. For more detailed performance for last week, please refer to here.
From the following table, one can see that other than municipal bonds (MUB), all of 'safe' fixed income assets now have positive trend scores, meaning their return behaviors are better than cash or short term treasury bill (SHV).Assets Class Symbols 03/11
Trend
Score03/04
Trend
ScoreDirection Commodities DBC 12.94% 16.8% v Gold GLD 9.46% 9.66% v US Stocks VTI 8.03% 10.61% v US Equity REITs VNQ 8.03% 8.47% v International REITs RWX 6.89% 9.33% v Emerging Market Stks VWO 4.64% 7.17% v US High Yield Bonds JNK 4.13% 4.99% v International Treasury Bonds BWX 4.04% 3.49% ^ International Developed Stks EFA 3.28% 7.15% v US Credit Bonds CFT 1.71% 1.09% ^ Emerging Mkt Bonds PCY 1.18% 0.29% ^ Intermediate Treasuries IEF 1.16% -0.27% ^ Frontier Market Stks FRN 1.01% 2.22% v Total US Bonds BND 0.97% 0.05% ^ Mortgage Back Bonds MBB 0.12% -0.55% ^ Treasury Bills SHV 0.05% 0.01% ^ Municipal Bonds MUB -1.22% -1.24% ^ The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).
It is especially telling that the trend score of intermediate term treasury bonds (IEF) are now positive, ahead of frontier market stocks (FRN). Is this the beginning of a turn?
Fundamentally, stocks across the globe are not cheap. Based on Valueline, Capital IQ and Bloomberg data collected by Prof. Damodaran at NYU, as of January 2011, the world market valuation is as follows:Aggregate Market Cap/Aggregate Net Income US 27 Europe 20 Emerging Market 21.9 Global 23.1
By no means, the equity markets are cheap. In fact, Shiller's CAPE 10 for US stocks is currently at 24.4, compared with its long term average 16.4 (see more detailed info here). This is about 49% over valued!
Coupled with the recent relentless ascent in all risk asset prices, the markets are very prone to sharp gyration.
Fortunately, major stock market downturns were usually preceded by relative strong movements of other assets, especially 'safe' assets. For example, at the end of 2007, fixed income investors started to sense the danger in general economies, long term treasury bonds (TLT) started to show its strength in 8/2007. In fact, by the end of 2007, TLT has shown enough strength to be ahead of SPY. The following chart shows the total returns of both SPY and TLT between 2007 to 2008.
Nobody can predict the future and we don't know what will lie ahead this time. However, as long as one maintains a risk level that is suitable to his/her situations and adheres to a systematic way to properly allocate assets, one can withstand possible market shocks. Moreover, adopting a more active monitoring on major asset movements can be helpful to make tactical decision in risk asset exposures. For example, a tactical asset allocation strategy that uses major asset trends was effective in the last two major stock bear markets, based on historical simulation.
Though current situation does not warrant a dramatic change of asset allocations, investors with over allocated risk asset exposure should start to lighten up and get back to their normal risk level. It is a prudent way to avoid big loss in one's portfolios.Symbols: EEM,VNQ,FRN,VWO,IYR,ICF,GLD,RWX,VTI,SPY,IWM,PCY,EMB,JNK,HYG,PHB,EFA,VEU,IEF,TLT,GSG,DBC,DBA,CFT,BWX,MBB,BND,MUB,SHV,AGG ,Symbols,(exchange), (NYSE,EEM),(NYSE,VNQ),(NYSE,FRN),(NYSE,VWO),(NYSE,IYR),(NYSE,ICF),(NYSE,GLD),(NYSE,RWX),(NYSE,VTI),(NYSE,SPY),(NYSE,IWM),(NYSE,PCY),(NYSE,EMB),(NYSE,JNK),(NYSE,HYG),(NYSE,PHB),(NYSE,EFA),(NYSE,VEU),(NYSE,IEF),(NYSE,TLT),(NYSE,GSG),(NYSE,DBC),(NYSE,DBA),(NYSE,CFT),(NYSE,BWX),(NYSE,MBB),(NYSE,BND),(NYSE,MUB),(NYSE,SHV),(NYSE,AGG),
Disclosure:
MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
- Major Assets: Risk Assets Strong While Safe Assets Have Negative Trends
03/07/2011
- Commodities Showed Their Hedge Amid Equity Weakness
02/28/2011
- Major Asset Trends: U.S. Stocks and REITs Strong, International Bonds Worth Considering
02/22/2011
- Major Asset Trends: Divergence of U.S. Stocks and Emerging Market Stocks Continues
02/14/2011
- Risk Chase Slows Down: A Good Time to Review Your Portfolios
01/10/2011
- Risk Appetite in Major Assets Increases
01/03/2011
- Major Asset Movements Muted, Bonds Continue to Stabilize
12/27/2010
- Major Asset Trends: Municipal and Other Bonds Recover Some, Commodities Strong
12/20/2010
- U.S. Stocks Strong; Other Bond Markets Continue to Slump
12/13/2010
- Major Asset Trends: Emerging Market Stocks Had a Bigger Drop while U.S. REIT Held Up Well
11/30/2010
- ETF Based Major Asset Class Trend Indicators For The Week of November 15
11/15/2010
- ETF Based Major Asset Class Trend Indicators For The Week of November 8
11/08/2010