Friday, October 30, 2009

A Sample ETF Portfolio for Vanguard Fans.

The Vanguard family of funds has many fans in the individual investor community. With their dedication to low expense fees, it's no surprise. Much has been made of the drag on performance of high fees, and there is a growing investment community that not only shuns investments with high fees, but rates fees and expenses high on the list of things to consider when choosing an investment.

For those of you who count yourselves among this lot of fans, here is a sample ETF portfolio that is entirely Vanguard funds. The average annual expense ratio of this portfolio is just 0.13%! It's geared toward the average risk tolerance with a 65% stock - 35% bond split.

  • 35% Vanguard Total Bond Market (BND)

  • 20% Vanguard FTSE All-World ex-US (VEU)

  • 20% Vanguard Large Cap (VV)

  • 15% Vanguard Small Cap (VB)

  • 5% Vanguard Emerging Markets Stock (VWO)

  • 5% Vanguard REIT (VNQ)


BND


Seeks to track the performance of a broad, market-weighted bond index. The fund invests by sampling the index.
EXPENSE RATIO:0.14%
YIELD:4.44%

VEU


Seeks to track the performance of the FTSE All-World ex-US Bond Index (foreign bonds).
EXPENSE RATIO:0.20%
YIELD:1.83%

VV


This fund employs a passive management investment approach designed to track the performance of the MSCI US Prime Market 750 index, a broadly diversified index of the stocks of predominantly large U.S. companies.
EXPENSE RATIO:0.07%
YIELD:2.00%

VB


This fund employs a passive management investment approach designed to track the performance of the MSCI US Small Cap 1750 index, a broadly diversified index of the stocks of smaller U.S. companies.
EXPENSE RATIO: 0.10%
YIELD:1.64%

VWO


This fund employs a passively managed investment approach by investing all or substantially all of assets in a representative sample of the common stocks included in the MSCI Emerging Markets index.
EXPENSE RATIO: 0.20%
YIELD:3.07%

VNQ


The Vanguard REIT ETF tracks the Morgan Stanley Capital International (MSCI) US REIT Index.
EXPENSE RATIO:0.11%
YIELD:5.58%

Wednesday, October 28, 2009

A Sample ETF Portfolio for Maximum Income (and Fat, Juicy Yields).

With the low fees and wide selection of ETFs, you can now build a portfolio for maximum and minimum fees relatively easily. Here's one such sample portfolio from Kiplinger that allocates 65% to bonds, 35% to stocks. The bond section is spread between conservative, laddered treasures and riskier junk bonds. As of a month ago, the yield for the portfolio was 6.4%. Not too shabby when you consider inflation is practically non existent and you can lock your money up for 10 years in treasury notes for a measly 3.6%.

  • 25% iShares iBoxx $ Inv Grade Corp (LQD)

  • 15% iShares iBoxx $ High Yld Corp (HYG)

  • 15% PowerShares Em Mkts Sov Debt (PCY)

  • 15% Vanguard REIT (VNQ)

  • 10% iShares DJ Select Dividend (DVY)

  • 10% PowerShares 1-30 Laddered Treas (PLW)

  • 10% Utilities Select Sector SPDR (XLU)


LQD


The iShares iBoxx $ Inv Grade Corp ETF tracks the iBoxx $ Liquid Investment Grade Index.
EXPENSE RATIO:0.15%
YIELD:5.30%

HYG


Seeks the results that correspond generally to the price and yield performance, before fees and expenses, of the iBoxx(Reg. TM) $ Liquid High Yield Index. The fund invests at least 90% of assets in securities that comprise the index. However, it may invest up to 20% of assets in certain futures, options and swap contracts, cash and cash equivalents, and in bonds not included within the index
EXPENSE RATIO:0.50%
YIELD:9.78%

PCY


This fund normally invests at least 80% of total assets in emerging markets U.S. dollar-denominated government bonds.
EXPENSE RATIO:0.50%
YIELD:6.08%

VNQ


The Vanguard REIT ETF tracks the Morgan Stanley Capital International (MSCI) US REIT Index.
EXPENSE RATIO:0.11%
YIELD:5.58%

DVY


The iShares DJ Select Dividend ETF tracks the Dow Jones Select Dividend index.
EXPENSE RATIO:0.40%
YIELD: 4.32%

PLW


This fund normally invests at least 80% of total assets in U.S. Treasury securities.
EXPENSE RATIO:0.25%
YIELD:3.56%

XLU


INDEX:The Utilities Select Sector SPDR ETF tracks the S&P International Dividend Opportunities index.
EXPENSE RATIO:0.48%
YIELD:3.57%

Monday, October 26, 2009

A Sample ETF Portfolio for Long Term Growth.

Here's an all ETF portfolio that's sure to see some volatility. It's geared toward long term growth, and as such it invests heavily in small cap stocks, foreign markets and commodities. The fund total is 90% stocks, 10% commodities and is best left to investors with long time horizons and a high tolerance for risk.

Here's the portfolio:

  • 40% iShares Russell 3000 ( IWV)

  • 20% Vanguard FTSE All-World ex-US (VEU)

  • 10% PowerShares DB Commodity (DBC)

  • 10% Vanguard FTSE All-Wld ex-US Sm Cp* (VSS)

  • 10% Vanguard REIT (VNQ)

  • 10% WisdomTree SmallCap Earnings (EES)


*Less than one year old.

IWV


Seeks investment results that correspond generally to the price and yield performance of the Russell 3000 index.
EXPENSE RATIO: 0.20%
YIELD:1.90%

VEU


Seeks to track the performance of the FTSE All-World ex-US Index.
EXPENSE RATIO:0.20%
YIELD:1.83%

DBC


Seeks to reflect the performance of the Deutsche Bank Liquid Commodity index.
EXPENSE RATIO: 0.75%
YIELD:N/A

VSS


Seeks to track the performance of the FTSE Global Small Cap ex US Index.
EXPENSE RATIO:N/A (just launched in April of 2009)
YIELD:N/A(just launched in April of 2009)

VNQ


Seeks to provide a high level of income and moderate long-term capital appreciation. The fund normally invests approximately 98% of assets in stocks issued by equity real estate investment trusts (REITs) in an attempt to track the investment performance of the Morgan Stanley Capital International (MSCI) US REIT Index.
EXPENSE RATIO: 0.11%
YIELD:5.58%

EES


Seeks to track the price and yield performance, before fees and expenses, of the WisdomTree SmallCap Earnings index.
EXPENSE RATIO: 0.38%
YIELD:0.80%

Thursday, October 22, 2009

A Sample ETF Portfolio for Growth and Income.

When this portfolio was originally recommended by Kiplinger, about a month or so ago, the yield was a hefty 5.8%.

A large part of that yield comes from the LQD fund that focuses on high-quality corporate bonds, the IGOV fund which buys foreign government bonds, HYG which focuses on junk bonds, and dividend stalwart DVY. It's important to not that the DVY ETF was hammered last year due to its heavy weighting in financial stocks. This has since changed, so don't expect the DVY to mimic bank stocks so much.

  • 20% iShares iBoxx $ Inv Grade Corp (LQD)

  • 20% iShares DJ Select Dividend (DVY)

  • 10% iShares S&P/Citi Intl Treas Bond (IGOV)

  • 10% iShares iBoxx $ High Yld Corp (HYG)

  • 10% SPDR S&P Intl Dividend (DWX)

  • 10% Utilities Select Sector SPDR (XLU)

  • 10% Vanguard Dividend Appreciation (VIG)

  • 10% Vanguard REIT (VNQ)


LQD


The iShares iBoxx $ Inv Grade Corp ETF tracks the iBoxx $ Liquid Investment Grade Index.
EXPENSE RATIO:0.15%
YIELD:5.30%

DVY


The iShares DJ Select Dividend ETF tracks the Dow Jones Select Dividend index.
EXPENSE RATIO:0.40%
YIELD: 4.32%

IGOV


The iShares S&P/Citi Intl Treas Bond tracks the S&P/Citigroup International Treasury Bond Index Ex US.
EXPENSE RATIO: N/A
YIELD:N/A

HYG


The iShares iBoxx $ High Yld Corp ETF tracks the iBoxx(Reg. TM) $ Liquid High Yield Index.
EXPENSE RATIO:0.50%
YIELD:9.78%

DWX


The SPDR S&P Intl Dividend ETF tracks
EXPENSE RATIO:
YIELD:

XLU


INDEX:The Utilities Select Sector SPDR ETF tracks the S&P International Dividend Opportunities index.
EXPENSE RATIO:0.48%
YIELD:3.57%

VIG


The Vanguard Dividend Appreciation ETF tracks the Mergent Dividend Achievers Select index.
EXPENSE RATIO:0.24%
YIELD: 2.24%

VNQ


The Vanguard REIT ETF tracks the Morgan Stanley Capital International (MSCI) US REIT Index.
EXPENSE RATIO:0.11%
YIELD:5.58%

Wednesday, October 21, 2009

A Sample ETF Portfolio for Alternative Investments.

If you're looking for an ETF portfolio that provides exposure to assets other than stocks and bonds, you may want to check this out.

The ETFs in this portfolio (from Kiplinger's magazine) are anything but the boring, old index funds that got the ETF started. The funds cover commodities like energy, gold and agricultural, but also Timber, Agribusiness and Water Resources. While those sectors and asset classes have a tendency not to follow stocks and bonds, they also have a tendency to be highly volatile, so the folks at Kiplinger also throw in a TIP fund to act as a ballast to help smooth the ride.

  • 20% iShares Barclays TIPS Bond (TIP)

  • 15% PowerShares DB Energy (DBE)

  • 15% SPDR Gold Shares (GLD)

  • 15% WisdTree Dreyfus Emerg Currency (CEW)

  • 10% Claymore Glbl Timber Index (CUT)

  • 10% Market Vectors Agribusiness (MOO)

  • 10% PowerShares Water Resources (PHO)

  • 5% PowerShares DB Agriculture (DBA)


TIP


iShares Barclays TIPS Bond ETF track Barclays Capital U.S.Treasury Inflation Protected Securities (TIPS) Index (Series-L).
EXPENSE RATIO: 0.20%
YIELD: 3.90%

DBE


The PowerShares DB Energy ETF tracks the Deutsche Bank Liquid Commodity Index.
EXPENSE RATIO: 0.75%
YIELD: N/A

GLD


The SPDR Gold Shares ETF tracks the price of gold bullion.
EXPENSE RATIO: 0.4%
YIELD: N/A

CEW


The WisdTree Dreyfus Emerg Currency ETF tracks money market rated investments in selected emerging market countries available to foreign investors and changes to the value of these currencies relative to the U.S. dollar.
EXPENSE RATIO: N/A
YIELD: N/A

CUT


The Claymore Glbl Timber Index ETF tracks the Clear Global Timber index.
EXPENSE RATIO: 0.71%
YIELD: 2.38%

MOO


The Market Vectors Agribusiness ETF tracks the DAXglobal Agribusiness index.
EXPENSE RATIO: 0.58%
YIELD: 0.73%

PHO


The PowerShares Water Resources ETF tracks an equity index called the Palisades Water index.
EXPENSE RATIO: 0.64%
YIELD: 0.51%

DBA


The PowerShares DB Agriculture ETF tracks the Deutsche Bank Liquid Commodity Index - Optimum Yield Agriculture Excess Return index.
EXPENSE RATIO: 0.75%
YIELD: N/A

Tuesday, October 20, 2009

A Sample ETF Portfolio for 100% Foreign Exposure.

Exchange Traded Funds (ETFs) offer broad diversity in a single package, and if the ETF is an index fund then they carry added tax benefits when compared to actively manage mutual funds. When ETFs first hit the investment scene, they were simple index tracking funds. They mainly targeted passive investors.

Since then, the number ETF offerings has exploded. One part of the expanded ETF universe is the group of ETFs that hold stocks in foreign and emerging markets. This makes investing in the non-U.S. world of equities a snap.

While the more mature foreign markets performed very much like the U.S. stock market during the most recent bear market, investing in foreign stocks is still an excellent way to tap into the fastest growing countries, and hence the biggest gains.

Here's a sample portfolio (from Kiplinger's magazine) of ETFs that invest in foreign equities.

  • 35% iShares MSCI EAFE Index (EFA)

  • 15% SPDR S&P Intl Dividend (DWX)

  • 15% WisdomTree Intl SmallCap Div (DLS)

  • 10% iShares FTSE/Xinhua China 25 (FXI)

  • 5% iShares MSCI Australia (EWA)

  • 5% iShares MSCI Brazil Index (EWZ)

  • 5% PowerShares Emerg Mkts Infrastr* (PXR)

  • 5% WisdTree Dreyfus Emerg Currency* (CEW)

  • 5% WisdomTree India Earnings (EPI)


*Less than one year old.

EFA


The iShares MSCI EAFE Index ETF tracks the MSCI EAFE index.
EXPENSE RATIO: 0.34%
YIELD: 2.71%

DWX


SPDR S&P Intl Dividend ETF tracks the S&P International Dividend Opportunities. index
EXPENSE RATIO: 0.48%
YIELD: 3.57%

DLS


The WisdomTree Intl SmallCap Div ETF tracks the WisdomTree International. SmallCap Dividend index
EXPENSE RATIO: 0.58%
YIELD: 6.45%

FXI


The iShares FTSE/Xinhua China 25 ETF tracks the FTSE/Xinhua China 25 index.
EXPENSE RATIO:0.74%
YIELD:1.31%

EWA


The iShares MSCI Australia ETF tracks the MSCI Australia index.
EXPENSE RATIO:0.52%
YIELD:4.14%

EWZ


The iShares MSCI Brazil Index ETF tracks the MSCI Brazil index.
EXPENSE RATIO:0.63%
YIELD:2.87%

PXR


The PowerShares Emerg Mkts Infrastr ETF tracks the S-Network Emerging Infrastructure Builders index.
EXPENSE RATIO:0.75%
YIELD:N/A

CEW


The WisdTree Dreyfus Emerg Currency ETF seeks to achieve total returns reflective of both money market rated in selected emerging market countries available to foreign investors and changes to the value of these currencies relative to the U.S. dollar.
EXPENSE RATIO:N/A
YIELD:N/A

EPI


The WisdomTree India Earnings ETF tracks the Wisdom Tree India Earnings index
EXPENSE RATIO:0.88%
YIELD:0.70%

Friday, October 16, 2009

Healthcare Stocks Ripe for Growth: ROBO-SURGERY.

This is the 3rd and final installment of the Healthcare Stocks Ripe for Growth series.Yesterday was medical records processor, Quality Systems and the week before that was Biotech company Gilead Sciences. This week we finish the series with a supplier of robo-surgery equipment, Intuitive Surgical.


Intuitive Surgical (ISRG).

Intuitive Surgical is an $875-million-a-year business that produces the da Vinci Surgical System which let surgeons operate by manipulating robotic arms while seated at a control console. The robotics allow for a more precise procedure, resulting in smaller incisions which result in less physical trauma to the patient and faster recovery times. All of that means lower costs as well.





While the share price of Intuitive Surgical has fallen from its recent high due to concerns over hospital buying power during the recession, the 2nd quarter profits were 22% higher than the previous year.

Competition.
What competition? Intuitive Surgical acquired their only rival in 2003, producing a de facto monopoly. De facto because there isn't anything keeping new competitors from diving in, except the startup costs. But in the meantime, the lead time Intuitive Surgical a big head start on building market share.

Growth story.
The da Vinci System is primary used for prostectomies and hysterectomies currently, but it's a relatively new technology. So as doctors gain experience with robotic surgery and the systems gain acceptance in the healthcare community, other types of procedures will be added.

Income.
Intuitive Surgical generates a lot of cash from sales of accessories and replacement parts for its 1,100+ systems. Each machine generates between $100,000 to $150,000 every year. Almost half of the company's 2008 revenue was from these recurring costs, and that percentage continues to rise. This, coupled with 0 debt and $902 million in cash, makes it a solid company with high growth potential.

Thursday, October 15, 2009

Healthcare Stocks Ripe for Growth: MEDICAL RECORDS.

This is a continuation of the Healthcare Stocks Ripe for Growth series this week. Yesterday, I profiled the Biotech company Gilead Sciences. This week is the medical record keeper, Quality Systems.

Quality Systems (QSII)


Regardless of whether the Obama administration gets public healthcare legislation passed, one thing you can count on is a bigger focus on improving healthcare technology and efficiency. In fact, $29 billion of the $787 billion spending plan enacted by congress shortly after the president's inauguration was earmarked specifically for such healthcare improvements.




The growth story.
It's no surprise that since then, Quality Systems has risen in price about 63%!

Given that kind of run up in price, it's likely that a large amount of the return has already been realized, but it is still a solid company in a growth sector. Anyone who's been to the doctor's office and seen the wall of folders housing patient records knows that there is still a lot of information yet to be digitized.

Quality Systems is one of the big players in the fledgling industry and is therefore in a good position to capture a large market share and benefit from the government's efforts to cut medical costs and increase the use of technology.

In good shape, financially.
The financial's seem to be in good shape as well. The are already profitable, have a 30% profit margin, no debt and $78 million in cash. The stock also sports a $1.20 annual dividend, about 2.3% yield. Analysts expect profits to grow 11% for 2009, and 30% for 2010 - and that's before the bulk of the money from tax payers kicks in.

Wednesday, October 14, 2009

Healthcare Stocks Ripe for Growth: BIOTECH.

Healthcare may not seem like a great investment right now, with all the talk of a government take over of the industry, but sometimes those are just the times that create great contrarian opportunity.

Today, I'm profiling 3 healthcare sector stocks that show promise of growth in the coming years, regardless of the decisions in Washington D.C..

If you're looking for some growth stocks in the healthcare sector, then these may be just the ones. Just be sure to do your due diligence and homework before you buy. This is presented for general informational purposes only.

First up is a biotech stock, Gilead Sciences.

Gilead Sciences (GILD) has managed to make weather the recession quite well so far, and has managed to maintain much of its profits. It may be due to the fact that GILD specializes in HIV pharmaceuticals, and many of their customers need that medication to survive.




The company posted 31% profit increase for Q2, 2009. This increase was due mostly to Truvada and Atripla, which are once-a-day HIV treatments. Those two pharmaceuticals alone contributed $3.7 billion in sales last year, which is almost 72% of Gilead Sciences' total sales.

Gilead has a serious economic moat as well, since they own 71% of the U.S. HIV drug market. They are on track to grow sales even more once Atripla is approved for European markets.

Diversification.
Gilead is taking steps to diversify through acquisitions of other pharma companies. They acquired CV Therapeutics (maker of a chronic angina treatment) and Myogen (maker of Letairis, a hypertension treatment) in the past two years. With these acquisitions alone, Gilead now has a presence in the cardiovascular drug market.

On solid ground.
Even after those acquisitions, Gilead Science still has almost $2.9 billion in cash. It also has a development pipeline and no soon-to-expire patents, something some larger pharma companies are struggling with.

The stock currently trades around 18 times this year's expected earnings.

Tuesday, October 13, 2009

Will Today be the Day the DOW Breaks 10,000?

The Dow Jones Industrial Average got pretty close yesterday to breaking the 10,000 point mark for the first time since the '08 crash. It's no surprise that there has been much attention paid to this. It is, after all, a significant number, even if it's mostly psychological.



Ask yourself, "Does the fact that the DOW crosses a given threshold really mean that much?" Isn't it the overall trend (direction and momentum) more important? Well, yes and no.

The DOW crossing the 10,000 point mark doesn't mean that the market is in a definitive bull phase, or that the recession has officially ended. It's not significant in that sense, but it is in a psychological sense. The market, which is nothing more than the aggregate opinion of all investors, has made 10,000 the hurdle of the moment and because if that very reason - and no other - it is significant.

It may not be today, and it may not be tomorrow, but rest assured that the DOW will cross that 10,000 boundary eventually (and probably soon), and when it does, you'll need to decide how it effects you.

Because so much emphasis is being placed on this figure, many investors will be using it as a bell weather. My gut is telling me that when the DOW does break 10,000, it won't stay there for long. I think many investors will use that mark as a time to take some profits off the table which in turn will drive the price of stocks back down a bit.

What does this mean? Well, it means that if you're one of these traders you'd better get your timing right. But it also means that if you're looking to buy back into the market soon, you might consider only doing so with part of your money, and keep some set aside for any potential dip in the value.

By doing so, you are ensuring that you will have some money invested whether the DOW blasts past 10,000 and keeps running, or if it drops back to 9,700 or so you can pick up some more potential bargains on the weakness.

Thursday, October 8, 2009

Is the Bull Market Running Out of Steam?

Earlier, I blogged about how the Dow was having trouble crossing the 10,000 point barrier. The basic premise was that the recent market rally was not due to fundamentals, but rather due to the market previously being over sold.

Well, a recent article from the AP points out that "Alcoa returns to profit as cost cuts", which I think supports one of my other thoughts on the rally. Namely, that the recent "good earnings" are not a sign of fundamental growth and profitability but rather due to reducing overhead.



"Painful cost-cutting and rising sales to automakers helped the nation's largest aluminum producer return to profitability for the first time in nine months."




This is an essential part of the market healing itself, but you can't cut your way to growth. Unless the fundamentals change, the recent rally is going to run out of steam, if not head back down for a double dip.

I can't predict the future, but I think this bears consideration and some caution may be prudent.

Still, there is some good news abroad in all this:



"We do clearly see growth, substantial growth ... in China," Alcoa CEO Klaus Kleinfeld told analysts and reporters after the company reported results. "(The) second half of the year is clearly better than the first half in many industries and many regions."

Friday, October 2, 2009

Dow Down as 10,000 Makes for Difficult Psychological Barrier.

The recent market rally seems to have stalled. Is it because the Institute for Supply Management's index of national factory activity declined in September? Is it because U.S. Auto sales dropped again, once the artificial stimulus ended? Is it because the unemployment claims rose unexpectedly again? Is it because the consumer confidence index fell? Or is it because the Dow was getting close to breaking the psychological barrier of 10,000?

Personally, I think it's all of the above - and more.

I think that the recent rally has largely been due to the realization that the economy is not going off a cliff, and it is not going the way of the that of the USSR after its breakup. It's a sudden elation that we've hit bottom, and the sun still rises and life goes on. In other words, it's not based of fundamentals.

It may appear on the surface that it's the fundamentals. After all, corporations are posting some increases in earnings, or less loss of earnings. But compared to what? Compared to 2008, you'd almost have to post big improvements, wouldn't you? The recent earnings are really a reflection that things in 2009 aren't as bad as the end of 2008. But is that the same thing as "good"?

What's going to happen in the next 6-12 months? What are corporate earnings going to look like then? See, I think the market is considering this and it's manifesting itself in this rally's pause.

Investors are looking ahead to that 6-12 month time frame, and they're not sure they see much real economic growth. Maybe I'm wrong, but there's a lot of unknowns that are coming down the pike, like how much are consumer credit losses going to be, or what happens to the housing market when all those ARMs reset. How much will banks lose when commercial real estate loans start defaulting?

The job market isn't showing any signs of turning around, and if consumers don't have jobs, they don't have incomes. And if credit is hard to come by, or the consumer is just plain gun-shy when it comes to borrowing, they aren't likely to increase spending.

Time will tell, but I'm getting the sense that the market is returning to a more rational place, and starting to question the "green shoots" hype.