31 Flavors of Exchange Traded FundsJack Ohayon CFA, Aug. 23, 2017, 8:09 p.m.
We can’t stress enough how much we love ETF’s (Exchange Traded Funds) at Helium Investments. They offer exceptional value and efficiencies. To construct client portfolios’, I have sifted through approximately 2,000 ETF’s.
Below is my list of some of the few interesting ETF’s I have come across.
VanEck Vectors BDC Income ETF – Ticker Symbol BIZD
Fund Return YTD: 4.43%
Benchmark Return: -0.10%
This ETF has a management expense ratio of 9.20%. At first, I thought this must be a typo. After digging deeper looking through the prospectus the breakdown of fees is shown below.
The Acquired Fund Fees and Expenses of 8.79% include fees and expenses incurred indirectly by the Fund as a result of investments in other investment companies, including business development companies (“BDCs”) which is another way of saying fees upon fees.
Principal Millennials Index ETF – Ticker Symbol: GENY
Fund Return YTD: 22.6%
Benchmark Return: 23.5%
This ETF seeks to provide exposure to global equity securities of companies that are impacted by the spending and lifestyle activities of the Millennial generation, which refers to people born from 1980 to the mid-2000s.
Very curious when they will close this fund. Will it be after all the millennials are grown up?
However, the returns are no laughing matter.
The Obesity ETF – Ticker Symbol: SLIM
Fund Return YTD: 26.16%
Benchmark Return: 27.00%
This ETF uses the Solactive Obesity Index as its benchmark which tracks the performance of companies positioned to profit from servicing the obese.
I was astounded that there was such an index and curious why it is needed.
Could this indicate we are in an ETF bubble?
Nevertheless, the AUM of this ETF is on the very slim side.
Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 3X Shares – Ticker Symbol: GUSH
Fund Return YTD: -57.35%
Benchmark Return: -28.78%
This ETF seeks daily investment results, of 300% of the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index.
Leveraged ETF’s are for extremely short-term investment to assist portfolio managers manage risk on portfolio’s exposure.
Leveraged ETF’s are also very dangerous when held for a long time with a lot of market volatility.
The above graph illustrates where you put $1,000 in the S&P 500 and a 4X leveraged S&P 500 ETF. If the market rises 10% for 3 days, your S&P investment would gain $1,331, a gain of $331. The leveraged fund would gain four times as much, turning $1,000 into $2,744.
A very enticing investment but still not worth the risk as we will see in days 4&5.
In Days 4 and 5, the S&P 500 falls 15% each day. Your portfolio is now worth $962, a bit less then what you started at. Meanwhile, the leveraged fund would magnify that loss 4 times, leaving you with a portfolio value of $439.