An exchange traded fund (ETF) can be a better proxy for a sector than a single stock. It takes the guesswork right out of investing.
Diversification is another element that is added when using ETFs instead of a single stock within a portfolio. An example is the GE (GE) stock that missed its numbers by a long shot late last week. While media has been a weak performer so far this year – PowerShares Dynamic Media (PBS) is down 10.4% year-to-date – and the financials are tough, there could be other reasons to own GE. The company, after all, wears many hats.
How about infrastructure?, asks Roger Nusbaum for Seeking Alpha. The infrastructure sector can cover a wide range of things, including roads, airports, utilities, information technology and other channels of communication. Breakdowns in some of these areas can lead to major disruptions in a country, as seen when China experienced a record snowfall this winter.
Globally, billion upon billions will be spent on infrastructure over the next decade or two. It is reasonable to assume that stocks in this sector will do well, wait until these funds move back above their trend lines before diving in. Countries and regions such as South Africa, Latin America and China are making infrastructure improvements a particular focus in the coming years.
Build up your portfolio’s inner strength with:
- iShares S&P Global Infrastructure Index (IGF), year-to-date down 10.1%
- SPDR FTSE/Macquarie Global Infrastructure 100 (GII), year-to-date down 5.8%
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.