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Articles on XLF

  • US Sectors Favor Telecom, Healthcare

    05/10/2011

    The US Economy is divided into various Sectors. Sector are classified as General Segments of the economy within which a large group of companies can be categorized. Overall the US sectors shows good performance last year except for financial companies. The sectors that show substantial growth are energy, material and telecom industries.

     

    Energy (XLE) returns dropped recently due to profit taking. Crude oil prices are currently at their highest level since 2008. The US Energy Information Association (EIA) predicted that oil markets will continue to tighten over the next two years due to slow growth from non-OPEC countries.  Due to these events we expect the drawdown in global petroleum stocks and an increase in production demand from the OPEC countries, another reason for reducing crude oil production is the recent Libya and Middle East conflict which will disrupt the crude oil supply globally. We are expecting good growth in the energy sector as the total demand of oil grows by an annual average of 1.5 million bbl/d in 2011 and 2012.

     

    We believe IYZ will continue to grow slowly this year. Economists and portfolio managers are moving towards technology with demands for new products as well as telecommunications providers with dividends and earnings growth. The returns are not impressive although steady in nature. Worldwide the demand of technology and telecommunication related products are gaining popularity making this sector interesting.

     

    XLV prospects appear bright as there is a surge as the population ages and healthcare expects to double by 2018.

     

    XLF still remain down while the things gradually improve: XLF growth is expected to be meager in 2011 but the things will improve in 2012 – 13.      


    Assets Class Symbols 05/06
    Trend
    Score
    04/29
    Trend
    Score
    Direction
    Telecom IYZ 11.63% 10.44% ^
    Healthcare XLV 10.93% 10.5% ^
    Industries XLI 9.92% 11.4% v
    Energy XLE 9.47% 17.92% v
    Consumer Discretionary XLY 9.37% 9.76% v
    Consumer Staples XLP 8.43% 8.95% v
    Utilities XLU 7.14% 6.48% ^
    Materials XLB 6.91% 10.93% v
    Technology XLK 6.08% 6.94% v
    Financial XLF 1.08% 3.51% v
    The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).

     

    Trend Rankings: The trend table ranks each of the ten U.S. industrial iShares ETFs and the score is based on the following formula: for an ETF or index, we use the average of 1, 4, 13, 26 and 52 week total returns (i.e. dividend and distribution reinvested). Notice the average of the total returns would overweight the recent price movement. This is similar to exponential moving average.

     

    One concern: The recovery of the economy will face challenges in upcoming months as they battle huge debt. S&P recently showed concern revising US credit rating. The current administration is making plans to cut the deficit which may lead to austerity programs that could affect the overall momentum of these sectors.

     

    Symbols:  XLY, IYZ, XLI, XLB, XLK, XLE, XLF, XLP, XLU, XLV


    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.

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  • XLE The Clear Sector Leader

    05/03/2011

     

    In a retirement account, Sector investing can be very worthwhile. It can lead to portfolio returns that “beat the market”. Sectors offer a way of focusing, in a disciplined fashion, similar to looking at Countries, or broad markets. At any given point in time, one or more sectors may be out performing other sectors, and the broad stock market. Portfolios that include Sector allocation can capture this performance.

     

    A great way to get sector exposure is through exchange traded funds. Today, there are numerous 'sector' type exchange traded funds that you can invest in. The iShares and the SPDR lineups are probably the two most popular. However there are several other providers that offer unique and interesting sector and industry ETFs.

     

    Below is the Sector performance table, sorted by “Trend Score”, which is also posted at MyPlanIQ - Global Trends .

    US Sectors TrendPerformance data are based on closing prices on April 29th 2011

    Description

    Symbol

    1 Week

    4 Weeks

    13 Weeks

    26 Weeks

    52 Weeks

    Trend Score

    Energy

    XLE

    1.9%

    0.61%

    13.56%

    36.92%

    36.63%

    17.92%

    Industries

    XLI

    2.84%

    1.9%

    8.48%

    21.41%

    22.37%

    11.4%

    Materials

    XLB

    1.04%

    1.74%

    8.45%

    18.79%

    24.64%

    10.93%

    Healthcare

    XLV

    2.89%

    5.89%

    11.99%

    14.16%

    17.58%

    10.5%

    Telecom

    IYZ

    1.95%

    2.63%

    7.69%

    14.23%

    25.69%

    10.44%

    Consumer Discretionary

    XLY

    1.6%

    3.18%

    9.67%

    16.07%

    18.29%

    9.76%

    Consumer Staples

    XLP

    2.01%

    4.82%

    9.38%

    11.14%

    17.39%

    8.95%

    Technology

    XLK

    1.48%

    2.81%

    3.87%

    10.58%

    15.95%

    6.94%

    Utilities

    XLU

    2.85%

    3.24%

    5.8%

    6.83%

    13.65%

    6.48%

    Financial

    XLF

    1.74%

    -0.91%

    1.06%

    13.2%

    2.44%

    3.51%

    The trend score is defined as the average of 1,4,13,26 and 52 week total returns (including dividend reinvested).

     

    With all of the headline news lately, it is no surprise that the Energy Sector ETFs are the strongest. The holdings inside the ETFs usually include the large cap oil companies such as Exxon and Chevron, and, some of the smaller cap companies. When crude oil, and petroleum product prices rise, usually the margins of the oil companies expand. An example could be the cost of production of a barrel of crude stays relatively fixed, as the selling price of the barrel of crude goes higher. Similarly, some of the costs of refining a gallon of gasoline stay relatively fixed, as the selling price of that gallon goes higher.

     

    These energy sector ETFs are definitely on my retirement portfolio watch list this year.

     

    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.

     

    Exchange Tickers: (NYSE:XLE), (NYSE:XLI), (NYSE:XLB), (NYSE:XLV), (NYSE:IYZ), (NYSE:XLY), (NYSE:XLP), (NYSE:XLK), (NYSE:XLU), (NYSE:XLF)

     

    Symbols: XLE, XLI, XLB, XLV, IYZ, XLY, XLP, XLK, XLU, XLF

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  • Schwab ETF Select List Plan Offers Diversification and High Quality Fund Selection

    03/16/2011

    by Kevin Carr, A MyPlanIQ Expert User

    On March 9, 2011, Charles Schwab announced the release of the ETF Select List.  The quarterly Schwab ETF Select List was created by Charles Schwab Investment Advisory, Inc. and is a filtered list of all of the ETFs in the marketplace, highlighting pre-screened, low-cost ETFs.  Schwab used quantitative and qualitative screens to filter each ETF and build the list, covering 6 major asset categories and 45 minor asset categories. All ETFs, including Schwab ETFs, are evaluated using the same criteria and broken into sectors for US Equity, Foreign Equity, Emerging Market Equity, Fixed Income, Commodity and REITs.

    The ETF Select List gives investors a choice of low-cost, pre-screened ETFs.  Schwab highlights just one ETF in each category, chosen based on specific criteria including expense ratio, risk, structure and how well it fits into its category. To make the list, an ETF has to meet minimum criteria that include assets under management, including narrowness of index, trading volume, bid/ask volatility, risk, annualized cost of ownership, fund structure and fit within a given category.  The list excludes exchange-traded notes (ETNs), inverse or leveraged ETFs, actively managed ETFs, and unmanaged baskets of securities.

    While the ETF Select List has only been out a few days, I constructed a plan on MyPlanIQ platform.  The Schwab ETF Select List  has no redemption periods, is commission efficient and offers low expenses. 

    As of March 13, the Schwab ETF Select List Plan has a four star investment menu rating with a 99% diversification score and an overall above average investment choice based on MyPlanIQ Plan Rating methodology .  The Plan Rating methodology is designed to measure how effective a plan’s available funds are using key factors such as diversification, fund quality and portfolio building.

    Attribute   Schwab ETF Select List   Six Core Asset ETF Benchmark
    Diversification   great (99%)   average (63%)
    Fund Quality   above average (70%)   below average (23%)
    Portfolio Building   average (53%)   above average (70%)
    Overall Rating   above average (72%)   average (54%)


    The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies (SAA and TAA , both provided by MyPlanIQ). For comparison purpose, we also include the moderate model portfolios of a typical 6 asset SIB (Simpler Is Better) plan . This SIB plan has the following candidate index funds and their ETFs equivalent:

    US Equity: SPY or VTI
    Commodity: DBC
    Foreign Equity: EFA or VEU
    REITs: IYR or VNQ or ICF
    Emerging Market Equity: EEM or VWO
    Fixed Income: AGG or BND

    Performance chart (as of Mar 15, 2011)



    Performance table (as of Mar 15, 2011)

    Currently Commodities, Real Estate and US Equity are doing well. These asset classes are available to Schwab ETF Select List participants.

    To Summarize, Schwab ETF Select List Plan offers wide diversification, high quality funds with low expenses. compared with other brokerage supported ETF plans, it is very favorable. From time to time, we will review the plan.

    Symbols:DBC,DBA,IAU,DBB,USL,PFF,VNQ,XLY,XLP,XLE,XLF,XLV,XLI,XLB,XLK,IYZ,XLU,BND,SCHO,SCHR,TLH,SCHP,CIU,JNK,BWX,MUB,SCHF,EFG,EFV,SCHC,SCHE,VEU,VT,VGK,VPL,EWJ,GXC,SCHX,SCHG,SCHV,VO,VOT,VOE,SCHA,VBK,VBR,SCHB,VYM,

    Symbols (exchange): (DBC),(DBA),(IAU),(DBB),(USL),(PFF),(VNQ),(XLY),(XLP),(XLE),(XLF),(XLV),(XLI),(XLB),(XLK),(IYZ),(XLU),(BND),(SCHO),(SCHR),(TLH),(SCHP),(CIU),(JNK),(BWX),(MUB),(SCHF),(EFG),(EFV),(SCHC),(
    SCHE),(VEU),(VT),(VGK),(VPL),(EWJ),(GXC),(SCHX),(SCHG),(SCHV),(VO),(VOT),(VOE),(SCHA),(VBK),(VBR),(SCHB),(VYM)

    comments(0)  Share/Bookmark

  • Morningstar's 401K Clone Begs the Question- What about Managed Funds?

    02/27/2011

    We have already examined the Morningstar 401K plan. We explained why it is a model of plan creation - providing a manageable number of funds with broad asset class exposure that enables portfolios that can deliver solid returns. We also provided an ETF clone which enabled portfolios that underperformed the original.

    Performance chart (as of Feb 25, 2011)

    Performance table (as of Feb 25, 2011)

     

    Portfolio Name

    1Yr AR

    1Yr Sharpe

    3Yr AR

    3Yr Sharpe

    5Yr AR

    5Yr Sharpe

    Morningstar 401K ETF Clone Tactical Asset Allocation Moderate

    15%

    112%

    8%

    63%

    11%

    75%

    Morningstar 401K ETF Clone Strategic Asset Allocation Moderate

    17%

    155%

    3%

    14%

    6%

    30%

    Morningstar Inc 401K Plan Tactical Asset Allocation Moderate

    22%

    168%

    13%

    121%

    14%

    125%

    Morningstar Inc 401K Plan Strategic Asset Allocation Moderate

    15%

    178%

    3%

    22%

    5%

    35%

     

     

    The chart is a little misleading as the ETF Clone has fewer choices until recently because of the newness of the ETF funds. If we look at the table and consider just the five year return figures we can see that the strategic asset allocation returns are similar but there is an additional 3% garnered from the original.

    This has prompted further analysis of the funds which we present here.

    We tracked returns for all of the funds used in each portfolio over 5, 3 and 1 years. Some of the ETFs are sufficiently new that there wasn't five year data. We then created a score which was the summation of the five year number multiplied by three, the three year number multiplied by 1.5 and the one year number.

     

     

    Name

    5 year AR (%)

    3 year AR (%)

    1 year AR (%)

    ETF Score

    Mu Fund Score

    DBC

    PowerShares DB Commodity Index Tracking

    5.97

    (4.76)

    20.50

    31%

     

    PCRIX

    PIMCO Commodity Real Ret Strat Instl

    2.32

    (8.45)

    20.85

     

    15%

    EWX

    SPDR S&P Emerging Markets Small Cap

    8.69

    (0.04)

    18.93

    45%

     

    NEWFX

    American Funds New World A

    8.29

    (0.21)

    17.00

     

    42%

    ODVYX

    Oppenheimer Developing Markets Y

    (2.86)

    (7.95)

    25.22

     

    5%

    VWO

    Vanguard Emerging Markets Stock ETF

     

     

    17.45

    17%

     

    JNK

    SPDR Barclays Capital High Yield Bond

    4.15

    6.89

    11.89

    35%

     

    PHIYX

    PIMCO High Yield Instl

    5.51

    6.10

    7.11

     

    33%

    PRRIX

    PIMCO Real Return Instl

    5.40

    4.34

    5.44

     

    28%

    TIP

    iShares Barclays TIPS Bond

    4.10

    2.46

    4.06

    20%

     

    AGG

    iShares Barclays Aggregate Bond

    5.28

    5.05

    3.76

    27%

     

    PTTRX

    PIMCO Total Return Instl

    8.07

    8.64

    6.61

     

    44%

    GVI

    iShares Barclays Interm Govt/Credit Bond

     

    3.12

    2.53

    7%

     

    LSBDX

    Loomis Sayles Bond Instl

    6.35

    4.82

    8.32

     

    35%

    PRWBX

    STABLEVALUE

    3.96

    3.07

    (0.21)

     

    16%

    SHY

    iShares Barclays 1-3 Year Treasury Bond

    3.65

    1.99

    1.07

    15%

     

    BSV

    Vanguard Short-Term Bond ETF

     

    1.08

    0.90

    3%

     

    VBISX

    Vanguard Short-Term Bond Index Inv

    4.36

    2.87

    0.10

     

    17%

    VEA

    Vanguard Europe Pacific ETF

     

    (2.68)

    17.45

    13%

     

    VWILX

    Vanguard International Growth Adm

    4.04

    (1.26)

    21.65

     

    32%

    EFV

    iShares MSCI EAFE Value Index

    (0.66)

    (4.69)

    12.77

    4%

     

    TBGVX

    TweedyBrowne Global Value

    2.87

    1.38

    13.75

     

    24%

    REFDX

    Morgan Stanley Real Estate I

    2.55

    2.13

    34.01

     

    45%

    VNQ

    Vanguard REIT Index ETF

    2.09

    2.26

    33.32

    43%

     

    FSLBX

    Fidelity Select Brokerage & Invmt Mgmt

    (1.09)

    (1.28)

    15.23

    10%

     

    XLF

    Financial Select Sector SPDR

    (10.63)

    (12.91)

    15.61

     

    -36%

    IWV

    iShares Russell 3000 Index

    1.91

    1.28

    21.97

    30%

     

    OAKMX

    Oakmark I

    4.75

    5.85

    17.86

     

    41%

    SLASX

    Selected American Shares S

    1.35

    (1.68)

    15.91

     

    17%

    VIG

    Vanguard Dividend Appreciation ETF

     

    3.37

    18.54

    24%

     

    VINIX

    Vanguard Institutional Index Instl

    2.11

    0.16

    19.63

     

    26%

    VTI

    Vanguard Total Stock Market ETF

    2.57

    1.55

    23.38

    33%

     

    CISIX

    Calvert Social Index I

    1.71

    1.66

    23.25

     

    31%

    HACAX

    Harbor Capital Appreciation Instl

    3.15

    4.35

    20.33

     

    36%

    MGK

    Vanguard Mega Cap 300 Gr Index ETF

     

    3.25

    23.65

    29%

     

    VUG

    Vanguard Growth ETF

    3.25

    2.33

    22.48

    36%

     

    RWMFX

    American Funds Washington Mutual R5

    1.68

    (1.10)

    16.74

     

    20%

    VTV

    Vanguard Value ETF

    2.03

    (0.60)

    19.16

    24%

     

    BRWIX

    Brandywine

    1.16

    (3.55)

    36.42

     

    35%

    IWP

    iShares Russell Midcap Growth Index

    4.55

    5.27

    38.04

    60%

     

    POAGX

    PRIMECAP Odyssey Aggressive Growth

    6.64

    9.56

    18.72

     

    53%

    VOT

    Vanguard Mid-Cap Growth ETF

     

    3.45

    36.71

    42%

     

    VASVX

    Vanguard Selected Value Inv

    4.65

    4.17

    23.07

     

    43%

    VOE

    Vanguard Mid-Cap Value ETF

     

    3.77

    23.68

    29%

     

    AOM

    iShares S&P Moderate Allocation

     

     

    9.73

    10%

     

    VGSTX

    Vanguard STAR Inv

    3.61

    2.57

    12.85

     

    28%

    OTCFX

    T. Rowe Price Small-Cap Stock

    5.52

    10.67

    38.04

     

    71%

    VB

    Vanguard Small Cap ETF

    4.14

    6.49

    31.92

    54%

     

    PSVIX

    Allianz NFJ Small Cap Value Instl

    6.67

    5.67

    28.03

     

    57%

    VBR

    Vanguard Small Cap Value ETF

    2.50

    4.42

    25.69

    40%

     

     

     

    Instead of looking at each fund individually, we added the scores in each of the major asset classes together:

     

    Asset Class

    ETF Score

    Mutual Fund Score

    MF/ETF

    Delta

    US Equities

    4.20

    4.22

    0%

    International Equities

    0.17

    0.56

    228%

    Emerging Markets

    0.62

    0.46

    -26%

    Real Estate

    0.43

    0.45

    4%

    Commodities

    0.31

    0.15

    -52%

    Fixed Income

    1.07

    1.73

    62%

    This gives us some insight on the different portfolios.

    • US equity returns are running neck and neck - indicating that to improve the returns of the ETF portfolio, looking at the US equities should only be undertaken when the other asset classes have been examined
    • There is a significant gap in the international equities. The Vanguard Europe Pacific ETF looks like it will help but this is an area for shoring up the ETF portfolio
    • The Emerging Market ETF outperforms the original so, while it may be better to improve performance, that is a secondary task
    • Real estate runs neck and neck so look at that later
    • Commodities, the ETFs are running ahead so, again, we can look at that later
    • Fixed income is probably the biggest area where the difference is explained. It is the largest single asset category in terms of funds invested (in most cases) and there is a significant difference between the two. The original plan has two of the leading managed fixed income funds which shows consistently higher performance.

    The takeaway is that to look to improve returns from the Clone ETF, focus needs to be applied on international and fixed income asset classes.

    As we go through this exercise, this will bring to the fore a elephant in the ETF space - are there times when managed funds do outperform indexed funds - intuitively it would seem so and fixed income in this market seems to suggest itself as a prime example.

    We will examine this deeper in an upcoming article

    Disclosure:

    MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.

    Symbols:DBC,PCRIX,EWX,NEWFX,ODVYX,VWO,JNK,PHIYX,PRRIX,TIP,AGG,PTTRX,GVI,LSBDX,PRWBX,SHY,BSV,VBISX,VEA,VWILX,EFV,TBGVX,REFDX,VNQ,FSLBX,XLF,IWV,OAKMX,SLASX,VIG,VINIX,VTI,CISIX,HACAX,MGK,VUG,RWMFX,VTV,BRWIX,IWP,POAGX,VOT,VASVX,VOE,AOM,VGSTX,OTCFX,VB,PSVIX,VBR,

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  • Rising Energy Costs: Casting a Cloud over Energy-Dependent Sector ETFs

    01/15/2011

    The relative performance among sector ETFs remained largely unchanged last week, with energy (XLE) retaining its top spot. However, we saw a broad-based drop in trend scores across sectors. Marking a shift in sentiment, consumer discretionary (XLY) dropped to the fourth spot from being second a week ago. By examining the following table, one can gain critical insights into how to build portfolios at the sector level:

    Assets Class

    Symbols

    01/12
    Trend
    Score

    01/05
    Trend
    Score

    Direction

    Energy

    XLE

    16.21%

    14.72%

    ^

    Materials

    XLB

    13.6%

    14.24%

    v

    Industrials

    XLI

    12.87%

    14.01%

    v

    Consumer Discretionary

    XLY

    12.11%

    14.32%

    v

    Technology

    XLK

    9.71%

    10.35%

    v

    Telecom

    IYZ

    8.74%

    13.08%

    v

    Financial

    XLF

    8.08%

    9.88%

    v

    Consumer Staples

    XLP

    5.21%

    6.52%

    v

    Healthcare

    XLV

    4.68%

    5.18%

    v

    Utilities

    XLU

    3.25%

    3.65%

    v

    Fundamentals are improving the in the financial sector (XLF), with industry bellwether J.P. Morgan Chase reporting record-breaking profits on Friday. As credit condition has improved, delinquencies have dropped and lending activities are picking up. The industry is still facing headwinds. Litigations centered on mortgage buyback and still weak housing markets will post pressure on the margins.

    Energy (XLE) was lifted by rising oil prices. Along with the sharp rise in demand for heating oil and naturals gas driven by the severe winter conditions in the Northeast, the closure of the Trans-Alaska pipeline has helped push oil past $91. One may ask the question of whether rising energy costs would post a thread to the economic recovery and how this would affect the dynamics in sectors (e.g. industrials (XLI), consumer (XLY)) that are exposed to the volatile oil market and that require large energy input.

    Some economists have suggested as the U.S. economy becomes more service oriented, with energy costs accounting for less in the overall cost structure of the economy, rising oil prices would have little effect on the overall economy. That said, it’s crucial to recognize that rising energy costs would certainly affect consumer behavior and business spending at least in the short run. Therefore, identifying sectors that would be negatively affected in an event of oil shock is critically important when building a portfolio at the sector level.

    For more detailed total return performance, please see here.


     

     

    labels:investment,

    Symbols:XLY,IYZ,XLI,XLB,XLK,XLE,XLF,XLP,XLU,XLV,SPY,QQQQ,IWM,MDY,EFA,VEU,EEM,VWO,IYR,ICF,VNQ,GSG,DBC,DBA,USO,LQD,CSJ,CIU,HYG,JNK,PHB,TLT,IEF,SHY,SHV,BND,AGG,MUB,MBB,

     

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  • Most U.S. Sector End Sharply Higher For The Year

    01/01/2011

  • U.S. Sectors Trend: Cautious Gains Amid Mixed Catalyst

    12/19/2010

  • U.S. Sectors Up on Economic Hopes

    12/11/2010

  • US Sectors Nov 29

    11/30/2010

  • US Sectors Up Across the Board

    11/23/2010

  • Top US Sectors Weather the week well -- bottom half feels the pain

    11/19/2010

  • ETFs Provide Insight Into U.S. Sectors' Performance

    11/12/2010

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