Thanks to a holiday in Washington D.C., U.S. residents had a
brief extension over the traditional April 15
deadline in order to get income tax returns in on time. With many
(including yours truly) waiting until this past weekend to get
their returns in, this extra two day time frame was welcomed news
to say the least.
The extra time has also allowed some investors to make one last
contribution to their IRAs, just squeezing by the deadline for the
2011 tax year, or at the very least getting a head start on 2012
deposits. Yet with markets slumping as of late-but still near 52
week highs-some might be wondering what is the best place to put
their new cash (see more in the
In light of this trend, it is important to remember that IRA
investing should be focused on the long-term. After all, besides a
few exceptions, investors must wait until they are 59 and ½ before
taking any distributions, lest they pay a penalty. Thanks to
this reality, investors should look beyond the present troubles in
the market and consider what will be big or important years into
While there are a number of great ETFs that can help investors
accomplish this task, we have selected three equity ETFs below that
could offer outsized opportunities for those willing to invest for
the long term. These three products could be ideal for those with a
decent risk tolerance and the ability to overlook short term
fluctuations for long-term gains (read
A Primer On ETF Investing
Furthermore, investors should note that all three of these
choices stay outside of the fixed income world. This approach looks
to cut down on risks and promote growth as fixed income ETFs could
be in for a rough patch at some point in the future should yields
As a result, fixed income may not be the best idea-at least in
large quantities-for an IRA investment, suggesting that investors
should look to these three equity ETFs for their allocations
Market Vectors Agribusiness ETF (
According to some estimates, the world population will reach
nine billion by 2050, a nearly two billion increase from today.
This means that the world population will grow by about a billion
once every twenty years, a scenario that looks to put a huge strain
on the carrying capacity of the globe (read
Teucrium Launches New Basket Agriculture ETF
One of the biggest beneficiaries of this trend looks to be the
broad agribusiness industry as farmers scramble to produce more
food for the world's hungry population. Thanks to this, as well as
the very likely possibility of higher food prices, farmers look to
have a ton to spend on agricultural products ranging from machinery
to fertilizer and everything in between.
In order to play this trend, investors should look no further
than Market Vectors' Agribusiness ETF (
). This ultra popular fund has assets under management over $5.5
billion and sees robust volume approaching 900,000 shares a
Nearly 40% of the portfolio goes to agricultural chemical firms,
while farming and fishing account for another 30% of holdings.
Packaged food products and industrial engineering also make up,
respectively, 11% and 15% of the fund too.
Furthermore, investors should note that the product has a decent
breakdown from a country perspective. North America accounts for
half the holdings, but Asia Pacific firms (19%) and European assets
also take up a decent chunk of assets as well.
While the yield-0.6%-- isn't that great in this agribusiness
ETF, the trends are certainly in the industry's favor. Assuming
that population growth continues to remain strong across the globe,
MOO, or any number of the other agribusiness ETFs, look to make
solid choices for the long term.
WisdomTree Emerging Markets SmallCap Dividend Fund (
While many developed markets continue to tread water, the
emerging market growth story remains an unstoppable force in the
global economy. In fact, some reports suggest that
close to 70% of world growth
will come from these markets over the next few years while by 2020,
BRICs are expected to account for nearly 50% of all global GDP
Still, many U.S. investors remain woefully underequipped to play
this trend as most Americans are still heavily concentrated in
domestic stocks. This could be to their determent, especially if
positive emerging market trends hold and these nations continue to
be the main source of global growth going forward (also read
Small Cap Real Estate ETFs: Crushing The
One way to play this tactic, with an interesting blend of growth
and value, is via a small cap dividend ETF from WisdomTree.
The ETF already has over a billion in AUM and sees average daily
volumes of nearly 170,000 shares, suggesting tight bid ask
However, the product does have a heavy focus on mid cap and
smaller securities, a trend which could increase overall volatility
in the product. Fortunately, the underlying index only includes
firms that are paying cash dividends, giving the ETF a value tilt
and an impressive 3.5% annual dividend yield.
Investors should also note that the product is well diversified
from a country perspective too; three nations take up at least 10%
of assets while another four account for at least 5% of the fund
each. Given this breakdown, as well as the individual security
allocations-over 500 companies are in this dividend ETF- investors
can rest assured that company specific risk will not be much of a
So, for investors who are light on emerging markets but are
willing to play the small cap space, DGS can be an interesting
choice. The focus on dividends could help to reduce volatility
overall and if one uses a DRIP strategy, the gains over a long time
period, assuming continued emerging market growth, could be immense
for patient investors.
iShares MSCI-Germany Index Fund (
The European debt situation continues to plague the markets,
dragging down a number of countries in the troubled region. Yields
continue to rise for important PIIGS members and no end appears to
be in sight for the common currency.
However, 10 to 20 years from now, it seems highly unlikely that
Europe will still be muddling through this malaise. That is why now
could be the time to position portfolios to play strong European
countries that look to prosper no matter what happens, like Germany
German ETFs On The Rise
Not only is Germany a major exporter with a favorable current
account balance, but the nation also has a very good investment
climate as well. In fact, according to a
recent global competitiveness report
, Germany is one of the seven most competitive markets on Earth and
ranks extremely high for innovation, business sophistication, and
Thanks to these metrics, Germany looks to have a sustainable
competitive advantage over a host of other markets in the region.
Furthermore, due to its relatively small size, the country will
have no problem continuing to export at a high rate to both fellow
European countries, as well as booming emerging markets.
As a result, investors should overlook the short-term worries in
the European market and buy the German ETF for their IRA. The
product is extremely liquid and has nearly $2.8 billion in AUM,
suggesting extremely tight bid ask spreads. Additionally, the 3.1%
yield could act as a nice boost in the meantime, especially for
investors who reinvest their dividends.
In terms of holdings, the German ETF is unique when compared to
other country-specific funds. Cyclical consumer stocks take the top
spot, followed by double digit weightings to financials, materials,
industrials, and health care. The product is a little concentrated
from an individual security perspective, however, the ETF still
holds over 50 stocks in its basket overall.
While in the near term Germany may face some issues, and even a
sharp downturn if the worst happens in Europe, the country looks to
be well-positioned for the long term. The 'German model' looks to
still be strong decades from now suggesting that for investors who
have a long time horizon and a medium risk tolerance, it could be
the time to take a closer look at this product for an IRA
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