Exchange traded funds trade on stock exchanges, just like stocks. Investors can buy them on margin, or sell them short. The best exchange-traded funds offer well-diversified, tax-efficient portfolios with exceptionally low management ETF fees. They are also very liquid.
Investors use ETFs in a variety of ways, and some investors work only with ETFs and no other type of investment in portfolio creation.
An amazing aspect of ETFs is their diversity. Some investors may create an entire portfolio solely from a few well-diversified ETFs.
ETFs trade on stock exchanges, just like stocks. That’s different from mutual funds, which you can only buy at the end of the day at a price that reflects the fund’s value at the close of trading.
Prices of ETFs are quoted in newspaper stock tables and online. You pay brokerage commissions to buy and sell them, but their low management fees give them a cost advantage over most mutual funds.
As well, shares are only added or removed when the underlying index changes. As a result of this low turnover, you won’t incur the regular capital gains taxes generated by the yearly distributions most conventional mutual funds pay out to unitholders.
ETFs have a place in every investor’s portfolio, at TSI Network we also recommend using our three-part Successful Investor strategy:
- Invest mainly in well-established companies;
- Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; the Consumer sector; Finance; Utilities);
- Downplay or avoid stocks in the broker/media limelight.
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In addition, the consumer defensive group also consistently holds up well during bear markets—a feat that is only matched by a few other segments such as healthcare and utilities.
Sector performance during tough times
When investor panic sets in, stocks go down leaving few places to hide....
NVIDIA YIELD SHARES PURPOSE ETF $30.82 (Neo Exchange symbol YNVD) invests in the common stock of Nvidia Corp....
The ranking system considers 336 different data points.
Those data points are grouped into four broad overall categories: economic performance, government efficiency, business efficiency, and infrastructure.
The overall objective of the ratings is to establish a country’s ability to maintain a competitive environment when measured against other countries.
Over the past five years, Switzerland’s rankings varied between the top ranking in 2021 and fourth place in 2019.
In the most recent survey, Denmark was ranked in the top position followed by Ireland....
Here is one ETF that provides exposure to leading Swiss publicly traded companies.
ISHARES MSCI SWITZERLAND ETF $47.38 (New York symbol EWL; TSI Network ETF Rating: Conservative; Market cap: $1.2 billion) tracks the performance of the largest publicly listed Swiss companies.
Healthcare companies account for 33% of the assets, while Consumer Defensive (21%), Financial Services (18%), Basic Materials (9%), and Industrials (9%) are other key segments.
The ETF holds a portfolio of 41 stocks; the top 10 holdings make up a sizeable 67% of its assets....
As their name implies, value stocks trade lower than their fundamentals would suggest. Investors perceive them as undervalued with the potential to rise. Even so, it’s best for you to zero in on the shares of quality companies with a consistent history of sales and earnings (or the ETFs that hold them)....
Stocks in the fund’s portfolio are equally weighted to reduce the risk associated with a high exposure to individual companies....
Meanwhile, the supplement starting on page 39 provides more information on the performance of various sectors during market declines.
VANGUARD CONSUMER STAPLES ETF $200.24 (New York symbol VDC; TSINetwork ETF Rating: Aggressive; Market cap: $7.7 billion) tracks the MSCI U.S....
Its top holdings are Enphase Energy (U.S.; home solar systems) at 12.6%; First Solar (China; solar panels), 10.7%; SolarEdge Technologies (Israel; solar-power batteries), 7.8%; Shoals Technologies (China; solar components), 5.7%; GCL Technology (China; polysilicon), 5.6%; and Sunrun (U.S.; panels), 5.6%.
The ETF’s MER is a relatively high 0.67%.
Renewable stocks have drifted down since early 2021; that follows big run-ups in 2020 on President Biden’s support for sun, wind and hydro power—plus strong investor interest in stocks gaining from environmental concerns....