It’s been an interesting week the world of ETFs: ETFs trended upwards at the beginning of the week but fell back in trading late Thursday and Friday. Here are the ETF Database staff picks of the week’s most important and interesting stories from around the Web:
VWO vs. EEM: Which Should You Buy? at Index Universe:
Although the Vanguard Emerging Markets ETF (VWO) and iShares MSCI Emerging Markets Index Fund (EEM) track the same benchmark (the MSCI Emerging Markets Index), the two funds have delivered very different returns. VWO has outperformed EEM in 2009, a trend that can be explained by a few unique factors. VWO uses what is called “full replication” to track its index, meaning it holds all the stocks in its index. EEM, by contrast, uses an “optimization” strategy, holding only a subset of those stocks to replicate the performance of the index. Also, EEM uses a larger percentage of ADRs and GDRs, which have caused an additional layer of differentiation between the two emerging market funds.
Introducing The ETFdb 60 Index at ETF Database:
We are proud to unveil the ETFdb 60 Index, the first all ETF benchmark encompassing the entire universe of investable assets. The index uses an equal weighting methodology and takes the biggest funds from each of the ETFdb Categories. These funds include 32 equity ETFs, 14 fixed income ETFs, 5 commodity ETFs, and 2 real estate ETFs. The ETFdb 60 Index also includes five multi-asset/exotic ETFs which gives the Index a balanced and diversified exposure to all asset classes.
5 International Real Estate ETFs In the Crosshairs at ETF Expert:
Gary Gordon discusses how international real estate ETFs are actually less volatile than their American counterparts and have posted a much higher return. In fact, SPDR U.S. Dow Jones REIT Fund (RWR) is up roughly 12% YTD, while the less volatile SPDR DJ International Real Estate (RWX) is up 34%. Gordon also points out that many American investors already have tremendous exposure to U.S. real estate due to their residences, and that they would be better served by diversifying their exposure into any number of international real estate funds (such as the Claymore/AlphaShares China Real Estate (TAO) which is up over 71% year to date).
Do High Commodity Prices Signal Economic Recovery? at ETF Guide:
ETF Guide presents several reasons why the worst may bot be over, despite higher commodity prices across the board. While ETFs such as GLD and OIL have posted solid gains, the author believes this is due to a weaker dollar for gold and capacity cuts for oil, not higher demand. The author also cites that industrial production levels are still down sharply and that without stronger fundamentals this rally cannot last.
How Health Care Overhaul Affects ETFs at ETF Trends:
Tom Lydon discusses the recent health care legislation and how it will affect ETF returns for the medical sector, especially given that health care stocks are now the worst performing industry (even worse than financials). With the passage of a bill in the Senate earlier this week, there are some possible winners and losers. The winners include PowerShares Dynamic Pharmaceuticals (PJP) and iShares Dow Jones U.S. Healthcare Providers (IHF) due to their ability to limit their penalties under the new bill, while the losers include Vanguard Health Care (VHT) and iShares Dow Jones Medical Devices (IHI) due to new fees they might be charged under the Baucus Bill.
That’s it for This Week in ETFs: happy reading. Have a great weekend everyone!