Looks can be deceiving. So can the performances of stocks and
ETFs. Relying on the wrong performance time frame can lead
investors to purchase the wrong ETF at the wrong time. Moreover,
relying on the wrong time period can keep investors out of the
right ETF at the right time.
Imagine this scenario:
At first blush, a given ETF looks great. It is is up 30 percent
year-to-date in June. So, an investor buys that fund July, but it
then declines markedly.
That scenario underscores the limitations of using
year-to-date performance as a deciding factor in purchasing (or
avoiding) select ETFs. All that glitters is not always gold. In
other words, investors need not be seduced or dissuaded by
year-to-date performances. Below are four examples that
illustrate this point.
Market Vectors India Small-Cap ETF (NYSE:
Nearly any India ETF could be inserted here. Nonetheless, the
Market Vectors India Small-Cap ETF could easily lure unknowing
investors into its web of deceit with its approximately 21.3
percent year-to-date gain. That might sound good, but SCIF's
year-to-date gain needs to be put into context. Since running
from around $9 in early January to just over $14 in late
February, SCIF has drifted lower and lower.
SCIF, like other India ETFs, has been afflicted with a gloomy
scenario. Global investors have likely become alarmed with
the state of the Indian economy
. This investor alarm could be warranted, based on India's rising
deficits, slowing growth and a tenuous hold on an
As a result, SCIF has lost almost 14 percent in the past 90
days. Within this period though, the ETF gained around 13.1
percent in the past month. The cold reality with India ETFs is
that they giveth, taketh away and repeat.
iShares MSCI Belgium Investable Market Index Fund (NYSE:
The year-to-date performance of the iShares MSCI Belgium
Investable Market Index Fund is arguably quite surprising, as
well as deceiving. Belgium is a Eurozone nation and the ability
of its economy and equity market to remain resilient, in the face
of the region's sovereign debt woes, has been impressive.
Relatedly, EWK is up six percent year-to-date.
Without considering the primary driver of this ETF's
year-to-date gains, investors could be misguided. Anheuser-Busch
) accounts for almost 27 percent of EWK'w weight and is up 27
percent this year. In the past month, the stock is up almost 14
percent, while EWK is not even up one percent. This disparity
might indicate that investors who want exposure to Belgium may do
well to own Anheuser-Busch InBev instead of EWK.
Market Vectors International High-Yield Bond ETF (NYSE:
The Market Vectors International High-Yield Bond ETF debuted in
early April. In the fund's two months of trading, it has lost
almost five percent.
IHY's potential problem may not be its junk bond holdings
(over 76 percent of the index the ETF tracks is rated
non-investment grade by Standard & Poor's). Instead, the
fund's biggest near-term hurdle could be its global nature and
euro denominated issues, which comprise about a third of its
Some investors have started to look past those concerns
because IHY now has $19.4 million in AUM and has surged 5.4
percent in the past month. Most of the fund's bond issues are
dollar-denominated. In addition, Market Vectors expects IHY will
pay a monthly dividend. These dividend expectations could
indicate that this ETF has some use for income investors that are
willing to take on some added risk.
iShares MSCI Taiwan Index Fund (NYSE:
EWT is sporting a year-to-date gain. However, as is the case with
other India ETFs, this fund would be negative year-to-date if not
for a stellar January-February run. In the past 90 days, EWT has
given up around 6.4 percent and the ETF's
technical outlook is far from rosy
. If EWT trades below $11.60, its technical picture could signal
that more downside would be approaching.
For more technical analysis on ETFs, click
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