investingfromtheright

I am retired and take educated guesses on all things financial.

December 26, 2006

December 26, 2006: ETF's blessed by CSFB (today retail, tomorrow the world)

"WE BELIEVE THAT RETAIL ETFs ARE A USEFUL INVESTMENT TOOL FOR THOSE MANAGING A PORTFOLIO.

The two main ETFs available for retail investors are RTH and XRT, both of which are quick, simple and inexpensive ways to gain exposure to the retail sector without having to choose individual stocks."

SHAZAMMM!

A top-ranked brokerage house is now recommending ETFs.I believe this is the tip of the ETF iceberg regarding ETFs as hedges and also as a significant portion of one's permanent portfolio.What I and other bloggers have pontificated about for months is now being echoed by a gold plate investment research firm.

I have received many e-mails from here and abroad regarding ETFs and there place within a portfolio. I have championed ETFs that can fit specific needs. Importantly, the investor must look at the contents of each ETF carefully. As CSFB points out in the trial sector, RTH and XRT are both retail ETFs, but hold very different baskets of stocks. CSFB notes that RTH is an index fund and is comprised of eighteen retail stocks. WMT, HD, TGT and LOW account for almost 50% of the fund's value. XRT is composed of fifty three retail stocks with the goal of tracking the S&P Retail Select Industry Index (a retail sub-industry portion of the S&P).While both offer the benefits of diversification, trading flexibility, hedging, liquidity and low costs, the RTH offers ownership benefits of a short portfolio while the XRT offers a rebalancing advantage. Thus, given the exposure to broadlines/hardlines/food and drug stocks, the RTH may be less useful for softlines investors, while the XRT offers a more balanced softlines/broadlines mix.

Bottom line: THE INVESTOR MUST KNOW WHAT IS IN THE ETF TO APPROPRIATELY INCLUDE THE VEHICLE IN A PORTFOLIO. DON'T GUESS!!

Links to this post:

Create a Link

<< Home