Evaluation techniques for exchange-traded products often
resemble the same process used by NFL franchises to figure out in
which round a particular player is worthy of being drafted.
Translation: Superficial numbers tell some of the story, but
often leave out key elements.
For example, a prospective NFL player can light it up at the
draft combine, running the 40-yard dash in 4.4 seconds and bench
pressing 225 pounds 35 times, but that doesn't mean he'll find
his way to the Pro Bowl. Likewise, an ETF can be heavily traded,
have over $100 million in assets under management and fulfill
other superficial metrics deemed important by so-called experts,
but those funds
can be duds when it comes to what matters most:
ETF investing is just like any other aspect of the financial
markets in that popularity is rarely a harbinger of alpha and
an ETF's size is no promise of good returns,
Just look at some of the funds that are up 20% or more
year-to-date that are all but ignored.
Market Vectors Germany Small-Cap ETF (NYSE:
There's no doubt that touching any ETF with heavy Euro Zone
exposure is a risk these days, but Germany ETFs have held up
pretty well. In fact, the $2.8 billion iShares Germany Index Fund
) is up more than 13% year-to-date. In general, that's
impressive, particularly if one chooses to ignore the 20.2% gain
offered by the $3.2 million Market Vectors Germany Small-Cap ETF,
an ETF that trades just 800 shares per day.
First Trust NYSE Arca Biotechnology Index Fund (NYSE:
With almost $251 million in AUM, the First Trust NYSE Arca
Biotechnology Index Fund is by no means small, but it is
unheralded compared to its primary rivals, the iShares Nasdaq
Biotechnology ETF (Nasdaq:
) and the SPDR S&P Biotech ETF (NYSE:
Those ETFs are up 19.7% and 22.2%, respectively, year-to-date.
That's nice, but only if one chooses to ignore the fact FBT
exists because FBT is up 35% this year and is arguably home to
better allocations to credible biotech takeover targets. It has
been said biotech stocks are firecrackers and have their brand of
dynamism. Looks like FBT is the king firecracker of biotech
Guggenheim China Real Estate ETF (NYSE:
A favorite past time of China bashers is calling for a real
estate bubble that is on the cusp of bursting. They say it could
ruin the world's second-largest economy and they talk about ghost
cities and other ominous elements. Those issues should not be
ignored, but the Chinese government is better equipped to deal
with a credit crisis than its Western counterparts were several
years ago due to the sheer fact that Beijing is better financed
than Brussels or Washington, D.C.
No, China real estate and TAO aren't without their risks. And
yes, TAO with all of $21.2 million in AUM, has offered better
than double the returns of the iShares FTSE China 25 Index Fund
) this year.
Global X Auto ETF (NYSE:
VROM and the rival First Trust NASDAQ Global Auto Index Fund
) will each soon celebrate their first birthdays, but despite the
fact that the auto industry is an integral part of the U.S.
economy, neither fund has really gained any traction with
Automakers are usually viewed as discretionary plays and parts
suppliers are arguably industrial stocks, so it's worth noting
that thinly-traded VROM is up almost 25% this year compared to
gains of 10% and almost 18%, respectively, for the Industrial
Select Sector SPDR (NYSE:
) and the Consumer Discretionary Select Sector SPDR (NYSE:
For more on lesser-known ETFs generating big returns, please
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