ETF Exchange Traded Funds
What Is An Exchange Traded Fund?
An exchange-traded fund or ETF is an investment vehicle traded on stock exchanges, much like stocks or bonds. An ETF holds assets such as stocks, bonds, or futures. Institutional investors can redeem large blocks of shares of the ETF (known as "creation units") for a "basket" of the underlying assets or, alternately, exchange the underlying assets for creation units. This creation and redemption of shares enables institutions to engage in arbitrage and causes the value of the ETF to approximate the net asset value of the underlying assets. Most ETFs track an index, such as the Dow Jones Industrial Average or the S&P 500.
An ETF is Like a Mutual Fund and a Closed End Fund
An ETF combines the valuation feature of a mutual fund or unit investment trust, which can be purchased or redeemed at the end of each trading day for its net asset value, with the tradability feature of a closed-end fund, which trades throughout the trading day at prices that may be substantially more or less than its net asset value. Closed-end funds are not considered to be exchange-traded funds, even though they are funds and are traded on an exchange. ETFs have been available in the US since 1993 and in Europe since 1999. ETFs traditionally have been index funds, but in 2008 the U.S. Securities and Exchange Commission began to authorize the creation of actively-managed ETFs.
March 26, 2014 - Guide to Internet ETFs by Zacks Investment Research
Though technology stocks have shown a nice comeback with most stocks gaining strongly starting this year, the sector has been hit lately as investors are dumping stocks due to profit taking and concerns over the Ukraine crisis.
Further, the technology stocks look expensive at current levels and the prospect of faster-than-expected monetary tightening in the recent FOMC meeting has compelled investors to pull out capital from this high growth and high beta sector.
Currently, Internet is lagging the broad tech sector as most of the stocks, such as Facebook (FB), Twitter (TWTR), Netflix (NFLX), Yahoo (YHOO), Amazon (AMZN) and Linkedln (LNKD), have plummeted double digits from their recent record levels, primarily thanks to lofty valuation.
Further, five of the six Zacks Industries that are classified as being in the Internet have negative outlook at present, suggesting rough trading for this segment in the coming days. Though the near-term outlook is disappointing, long-term trends in the Internet space appear promising.
This is especially true, as this corner of the broad technology space has enjoyed a strong rally over the past five years, gaining more than 300%. This trend is likely to continue this year thanks to growing Internet usage, rising global IT spending, improving overseas demand, technology innovation and surging popularity of e-commerce that will likely drive this space to the new age.
Given this, risk tolerant long-term investors may want to consider this recent slump a buying opportunity, should they have the patience for extreme volatility. For those investors, we have highlighted two Internet ETFs that could be excellent picks given that the duo has a Zacks ETF Rank of 2 or ‘Buy’ rating, suggesting that it will likely outperform the broad market index over a one-year period.
First Trust Dow Jones Internet Index (FDN)
This is one of the most popular and liquid ETFs in the broad tech space with AUM of nearly $2.3 billion and average daily volume of more than 387,000 shares. The fund tracks the Dow Jones Internet Composite Index and charges 57 bps in fees per year.
In total, the fund holds a small basket of 41 securities with Google as the top firm with 10.04% of assets. Amazon and Facebook occupy the next two positions at 7.30% and 6.57%, respectively. The fund is tilted toward large caps at 62% while mid and small caps take the reminder. Also, the ETF puts more focus on growth stocks with 75% share.
From a sector look, Internet mobile applications account for more than half of the portfolio while Internet retail and software & programing receive double-digit exposure. The ETF lost nearly 6% over the past one month.
PowerShares Nasdaq Internet Portfolio (PNQI)
This fund follows the Nasdaq Internet Index, giving investors exposure to the largest and liquid stocks in the broad Internet industry. The ETF holds 99 stocks in its basket with AUM of $390.8 million while charging 60 bps in fees per year. PNQI trades in moderate volume of less than 80,000 shares a day.
In terms of holdings, Amazon (AMZN), eBay (EBAY) and Google (GOOG) occupy the top three holdings with 8% of assets each. The fund is titled toward large cap and growth stocks, as these make up for respectively three-fifths and three-fourths of the portfolio.
In terms of industrial exposure, Internet mobile applications make up for about 69% of assets, followed by Internet retail and software & programing. PNQI is down over 6% over the past one month.
China Internet Market is Also Booming
Though Internet penetration is very low in China compared to the U.S., awareness and importance of the Internet is spreading rapidly among the Chinese. This is primarily thanks to surging demand for e-retail, growing broadband usage and technological advancements. Further, people are embracing e-commerce activities and PC sales are increasing, thereby fueling growth in this space.
In order to tap this rapidly growing Chinese Internet market, investors have only one option at their disposal – KraneShares CSI China Internet Fund (KWEB). This ETF provides concentrated exposure to the Chinese Internet market by tracking the CSI China Overseas Internet Index.
The product has newly debuted in the China ETF space, having amassed an impressive $78.2 million in AUM in just eight months. Holding 28 stocks, the product allocates a combined 26.14% of assets to Tencet Holdings (TCEHY), QIHO 360 Technology (QIHU) and Baidu.com (BIDU).
The fund is slightly expensive, charging 68 bps in fees per year. Additionally, it trades in a moderate volume of over 58,000 shares a day, ensuring extra cost in the form of bid/ask spread. KWEB added just 0.6% in the past one month.
March 11, 2014 - 3 Top Ranked ETFs from Hottest Sectors by Zacks Investment Research
Better-than-expected jobs report for February has raised hopes that the economy is beginning to thaw. Most analysts now believe that weak economic data for the past couple of months was mainly the result of unusually cold weather conditions. If they are correct, the economy might pick up momentum as the spring arrives.
Improving economy is one of the main reasons to believe that the five year old bull market still has legs. Further, even though the Fed may continue with gradual withdrawal of its QE program, the monetary policy is still very accommodative. With earnings near all-time high, US companies have been returning record amounts of cash to investors via dividends and buybacks.
Fourth quarter earnings have been a mixed bag, but at the same time, investors are clearly rewarding stocks and sectors that have been witnessing positive earnings momentum. One easy way to identify sectors with improving earnings prospects is to look at Zacks Industry ranks, which are based on earnings estimates revisions.
And a good way to invest in these sectors is to look at ETFs that have earned top Zacks ranks, based on their potential to outperform their peers.
Financial Select Sector SPDR Fund (XLF)
Financial sector’s performance has been in-line with the market this year. Mixed earnings and flattening yield curve weighed on the sector.
But long term rates may start creeping up with improving economy. Further housing market may pick up momentum after spring. Those developments will be positive for banks.
The Fed is set to release the “stress test” results for 30 large banks later this month. It is widely expected that many of these banks will get their capital plans approved and will be able to increase dividends and buybacks.
Looking at industries within the broader financial sector, insurance (ranked #3 out of 62 M industries), investment managers (#6) and banks & thrifts (#7) are witnessing strong positive estimates revisions in the past few weeks, resulting in their top industry ranks as of now.
XLF is the largest and most popular ETFs in the financials space. This product has $18.5 billion in assets under management and trades in heavy volume of more than 40 million shares a day.
The ETF charges 16 bps in fees per year from investors and is the second cheapest choice among financial ETFs. The product currently holds about 83 securities in its basket—with Wells Fargo, JP Morgan Chase and Berkshire Hathaway being the top holdings.
In terms of industry exposure, the product has highest exposure to banks at 38% while insurance, capital markets, REITs and diversified financial services also account for double-digit allocation. (Read: Mid-cap ETFs leading the broad rally)
The ETF has a Zacks ETF Rank of 1 or ‘Strong Buy’.
SPDR S&P Aerospace & Defense ETF (XAR)
Despite budget related worries, this small sector has been doing very well for the past many months, thanks mainly due to strong momentum in the commercial aviation market. "Aerospace & Defense" is currently #5 (out of 62) on the Zacks M industry list.
Fourth quarter earnings were excellent for the Aerospace sector with an 88.9% earnings beat ratio, 88.9% revenue beat ratio and 20.0% earnings growth.
Launched in September 2011, this product tracks S&P Aerospace and Defense Select Industry index, which is a modified equal weight index.
This product has attracted AUM of $52.6 million so far. It holds 36 securities with weighted average market cap of $21.7 billion. It charges 35 basis points in expenses and has a decent dividend yield of 1.2% currently.
Being modified equal weighted, the fund is pretty well diversified with the top holding accounting for just 4.6% of total assets. It has returned almost 60% in the past one year.
XAR is a Zacks Rank #1 (Strong Buy) ETF.
First Trust NASDAQ Clean Energy Green Energy Index (QCLN)
Alternative energy is one of the hottest industries in the energy sector, thanks mainly to concerns about carbon emission, climate change and other environmental issues. QCLN is based on the NASDAQ Clean Edge Green Energy Index. Launched in 2007, the fund now has $194.8 million.
The industry is currently ranked #4 (out of 62) on the Zacks M industry list.
QCLN holds 42 securities in its basket and is top heavy with top 10 holdings accounting for more than 60% of assets. Current investor darling Tesla Motors is the top holding with more than 12% of the asset base.
The fund has delivered scorching returns of almost 95% in the last one year.
QCLN is a Zacks Rank #1 (Strong Buy) ETF.
Click the Links Below to Review ETF Exchange Traded Fund Trade Alert Software and Advisory Services
Portfolio Prophet Exchange Traded Funds Trade Alert Software
The Portfolio Prophet is our premium trade alert software for quickly & easily adding Exchange Traded Funds (ETFs) to your trading portfolio. The Portfolio Prophet alerts you whenever a new trade is setting up; then, it follows the trade to completion, so you'll know exactly when to change your stop orders which "lock in" profit. You can even customize it based on your risk tolerance - aggressive, moderate, or conservative.
Industry Sector ETF Investment Advisory
Free email newsletter. John Nyaradi is Publisher of Wall Street Sector Selector: Professional ETF Trading, an online publication specializing in news, analysis and information regarding exchange traded funds. John's writes a weekly column for Investor's Alley, a widely read internet site, and his investment articles have appeared in many online publications including Dow Jones Market Watch, Trading Markets, Money Show, Yahoo Finance, Investors Insight, Fidelity, SeekingAlpha, ETF Daily News, iStock Analyst and many others.
ETF, Exchange Traded Funds Research, ETF Investing
ETF Screener with Lowest Price-to-Fair Value, Most Heavily Traded, and YTD Top Performers. ETF Tools with ETF Performance Table, ETF Analyst Picks, ETF Valuation Quickrank, Cost Analyzer ETF, and ETF Analyst Reports. ETF Discussion Boards and Free ETF Newsletter.
Industry Sector Timing Signals Investment Newsletter
The strategy behind the Sector Timing Report is a process of continuous upgrading your investment holdings to maximize portfolio returns. Our upgrading strategy works because as economic and market conditions change, new sector leaders rise to the top of our proprietary sector scoring system. We buy these top ranked sectors and hold them for as long as they outperform their sector peers. When a holding starts to drop in rankings we sell it and move on the the next hot sectors in the market. Rebalancing our holdings monthly keeps us in the latest leadership sectors at all times.
ETF Advisory by Wall Street Cheat Sheet
At last, a trading system that buys the right ETFs at the right time, time after time! By combining the power of Exchange Traded Funds with professional sector rotation, you can ride the bull instead of getting trampled by the herd, reduce your risk and consistently profit by following the "big money" into the most profitable sectors in the world.
Feel the Power of TD Ameritrade and Trade Free for 60 Days
Committed to providing one of the highest levels of service since 1975. For over 35 years we’ve prided ourselves on providing our clients with industry leading customer service and resources.
Three Reasons to Choose TD Ameritrade for ETF Trading
1. Over 100+ Commission-free ETFs - We offer a curated selection of commission-free ETFs selected by Morningstar Associates.
2. ETF Knowledge Center - Leverage the ETF Knowledge Center and arm yourself with greater information and education on ETFs. Explore video tutorials, articles, and announcements on a range of topics, from ETF basics to in-depth subjects like accessing commodities, risks associated with leveraging, and measuring ETF liquidity.
3. Powerful Trading Platforms - Trade Architect® and thinkorswim® help you to seize opportunities with real-time ETF quotes, market insight and streaming news to give you new trading ideas.
Stock Option Forex Futures Training Seminars Webinars Workshops
Click Here For The Complete 2014 Schedule
Professional investors traders teaching successful low-risk high-reward
trade strategies. Power profit secrets for stocks, options, forex, futures
investing trading success. Or avail of Home Study Courses and or
Trading Softwares available to improve your investment returns.