Never judge a book by its cover, and the same goes for an exchange traded fund (ETF). Matt Hougan for Seeking Alpha gives five examples.
- iShares MSCI Pacific ex-Japan Index (EPP) $4.5 billion in assets and Asian exposure? Sounds great. But there isn’t a whole lot of Asia in the ETF. 65.4% is in Australian stocks and 1.5% in New Zealand. One third of the fund is Singapore and Hong Kong, so pay attention to Pacific.
- SPDR S&P Emerging Europe (GUR) Last time we checked, Russia wasn’t part of Europe. Nor did it have plans to join the European union. 58% is weighted in Russia — more than half! Poland, Turkey, Hungary, and the Czech Republic round it out.
- PowerShares Value Line Timeliness Select Portfolio (PIV) Time is not on its side, with 9.51% gains vs. 13.04% for the index since December 2005. Value is off too, for the index is taking more of a growth slant. There is no low volatility, value screened take on the market here.
- PowerShares Nasdaq-100 QQQ (QQQQ) The index is skewed, as it appears as a tech proxy. 65% of the fund is tech, however, the rest is healthcare, consumer discretionary and more. The index’s social weighting methodology ping-pongs from market cap weighting to price weighting with no true pattern.
- ProShares ETFs These are great to short the market and offer liquidity and interest income. Compounding is the only issue that remains unclear. The math doesn’t work out when "delivering 200% of the daily return of their benchmark indexes." Bottom line: Know what you are buying beforehand.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.