The first quarter of the year was incredible, with major
indexes hitting all time new highs or trading near all time
highs. S&P 500 ended the quarter with a 10% gain and almost
20% higher than the lows of Oct 2011.
Meanwhile, the Dow achieved a gain of 11.3% in the quarter,
suggesting to many that a bull market is back (
Top Performing ETFs of the First Quarter
Consequently, for the ETF universe, the first quarter of the
year was pretty impressive with quite a few
experiencing heavy inflows and posting double-digit gains as
well. While equities have experienced heavy inflows for quite
some time, bond ETFs still remain popular, meaning that all
investors haven't jumped into equities just yet.
Moreover, the resurgence in the market got a further boost
from encouraging economic data like rising home sales numbers and
an improving employment scenario. Given the strong fundamentals,
the markets are expected to continue with its bullish rally going
However, some believe that major indexes appear to be
overbought, meaning that there may be a pullback in the market.
We have already started to see this in recent trading sessions,
suggesting that the market may be due for a breather here.
Yet given some of the bullish underlying data and the boost
from the Fed, this trend could have legs after a consolidation
period. In such a scenario, we would like to highlight a few ETF
picks for those looking to buy on the dip and get into some
solid, well diversified names, in hopes of a continuation of the
bullish trend after this dip is over (
3 ETF Strategies For Long Term Success
Global X Super Dividend (
SDIV represents a compelling product to invest in during times
of any market pullback. SDIV is an equally weighted basket of 100
high yield stocks from around the world. With 30% exposure in
U.S. equities, the fund also provides access to securities in
Europe, Australia, Asia, Canada and Latin America.
Among sector allocation, real estate, financial services and
telecommunication remain the top three choices for the fund.
The fund's tilt towards REITs has really worked well as these
securities represent an alluring blend of higher returns and
impressive yields. Undoubtedly, the U.S. REIT industry has posted
a good performance, but a blend of U.S. and international REIT
ETFs has been outstanding (
Real Estate ETFs--Real Winners in 2013?
On the other hand, financials may prove to be a good
investment opportunity this quarter as well. Lately, the
sentiment for the sector has been quite bullish and should
continue to provide good returns. And lastly with wireless usage
gaining momentum in emerging markets, telecommunications outside
U.S. should continue to positively impact the ETF.
Also, the 30-Day SEC yield at 6.9% represents a good
opportunity for investors to generate some income at times of a
major pullback in the market. The fund has gained 7.1% in the
first quarter of the
WisdomTree Japan Hedged Equity Fund (
DXJ is another interesting fund to invest in during a
pullback. Japanese equities represent a good investment
opportunity at present, as Prime Minister Shinzo Abe continues
with its aggressive policies in order to revive back the economic
growth of the country (
DXJ--Best ETF to Play the Japan Rally
The central Bank of Japan or BOJ is all set for another round
of monetary stimulus for the country which should further boost
the Japanese equities and weaken the yen which had appreciated
tremendously in the past few years. With that being said, ETFs
tracking Japan should continue to gain momentum even if the
market heads for any pullback.
And with Japanese equities gaining strength and the yen
depreciating, DXJ can prove to be the right choice for investors
as it has been designed to provide a hedge against currency
In the first quarter of the year, DXJ turned out to be the
most popular ETF in terms of inflows. The surging product
accumulated $4 billion of fresh cash in the first quarter,
crushing U.S.-centric funds in the process.
The ETF gained 17.2% in the quarter, making it one of the best
performing funds in the Japanese equity space.
The fund manages an asset base of $5.4 billion and trades at
volume levels of more than 5.3 million shares a day. This asset
base is invested in a basket of 264 securities and the fund
charges a fee of 48 basis points on an annual basis (
As Yen Weakens, Currency Hedged ETFs Soar
PowerShares S&P 500 Low Volatility ETF (
In case of a market pullback, investing in ETFs that carry
lower risks is a prudent option for investors. In this context,
SPLV represents a good option while still providing investors
will great diversification and high volume.
SPLV comprises of stocks from the entire universe of the
S&P 500 that have exhibited lowest historic volatility over
the trailing twelve-month period. In case of a market slump,
these stocks could be better positioned and thus perform better
This is the reason why the ETF has a tilt towards low beta
sectors like consumer staples and utilities. These two segments
together account for 55.2% of the asset base, so there is some
concentration risk, but it should help to control volatility
SPLV appears to be the most popular ETF in the segment trading
at volume levels of more than 2 million shares a day. The fund
manages an asset base of $4.4 billion and invests it in a basket
of 100 securities. In terms of expenses though, SPLV charges a
fee of 25 basis points annually, so it is pretty low cost.
It should be noted that despite the S&P 500's strength,
the low volatility ETF has been in focus and actually beating the
market. The ETF has experienced substantial asset inflow and has
generated a return of 12.9% in the first quarter of the year.
SPDR S&P Transportation ETF (
Transportation is another segment of the market which is
poised for solid growth this year and any temporary pullback in
the market should not impact its potential for growth (
Transport ETFs: Can the Surge Continue?
With fundamentals for the economy improving, the transport
industry is sure to benefit as more goods are moved around and
businesses gather momentum.
With this focus, XTN represents a good investment opportunity
to play the sector. The fund has $45.03 million in asset under
management and provides access to 39 securities.
Trucking, Airlines, Air Freight & Logistics and Railroads
get double-digit allocation in the fund while a small allocation
has also been made to marine firms. Among individual holdings,
the fund does not invest more than 3.69% in any company. The fund
charges a fee of 35 basis points annually.
Even with some recent shakiness in the market, there are a
number of segments which remain interesting values. It could be a
good idea to view any dips as buying opportunities, especially in
the aforementioned funds, which look to hold up better than most
in Q2, no matter what happens.
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WISDMTR-J HEF (DXJ): ETF Research Reports
GLBL-X SUPERDIV (SDIV): ETF Research Reports
POWERSH-SP5 LVP (SPLV): ETF Research Reports
SPDR-SP 500 TR (SPY): ETF Research Reports
SPDR-SP TRANSPT (XTN): ETF Research Reports
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