ebook essays pieces of the puzzle
Saturday, May 7th, 2011
another example

The Brazil/Russia/India/China concept has been around for a decade, but the funds to invest in it showed up in 2006 and 2007.  The chart above shows them:  exchange-traded funds from SPDR (BIK), Guggenheim (EEB), and iShares (BKF), plus open-ended funds from Goldman Sachs (GBRAX) and Templeton (TABRX).

The timing of the introductions could have been better, as those markets got hit very hard during the financial crisis.  The funds have recovered most of the dramatic losses, although none has matched the S&P 500 during this period, which was down two percent.

The other interesting point is that the results line up perfectly in relation to the expense ratios, from the best performer to the worst:  0.50%, 0.60%, 0.69%, 1.89%, and 2.15%.  That’s not counting the hefty front-end sales charges on the open-end funds or the comparatively skimpy commissions to buy the ETFs.

Without doing additional due diligence, which funds would you purchase?  This is another example why the ETF juggernaut will continue to take share and to disrupt many of the traditional structures for managing and marketing investments.  (Chart:  Bloomberg terminal.)

something’s fishy

In her latest monthly newsletter, Mariko Gordon of Daruma Asset Management ponders the annual Russell rebalancing, coming up on June 24.  It’s a good reminder of some of the issues that come from stocks being divvied up into style indexes — not just whole stocks, but parts of them.  For a dramatic look at the day-to-day impact of such recategorization, check out the chart of Daruma’s portfolio “changes” that resulted from three such rebalancings of the past.

drawing the line

Josh Brown (AKA The Reformed Broker) doesn’t plan on speaking at his client’s daughter’s wedding — or calling up the elder care division of his investment firm when he thinks his client is getting forgetful — as a posting of his on the Wall Street Journal indicates.  What should a financial advisor provide?  Where does yours draw the line?  What do you want him or her to be?  Important questions that aren’t going away any time soon.

i don’t know

Every product imaginable is provided, as Josh Brown points out, and every answer imaginable it seems too.  I used a comment by Jason Zweig of the WSJ to explore a key question.  When should an advisor (or any investment professional) say, “I don’t know“?

it’s that time

“In the spring, at the end of the day, you should smell like dirt.” – Margaret Atwood.