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ETF Updates Archive

Is Asset Allocation Dead?

Asset allocation, the practice of spreading a portfolio across different investments to diversify risk, failed miserably in 2008 when almost all asset classes fell together.  So is asset allocation dead?  Yes, and no.

 

Failure of a Fail-Safe Strategy

 

The WSJ's Tom Lauricella does a nice job of explaining what happened in 2008 in his recent piece, Failure of a Fail-Safe Strategy Sends Investors Scrambling.  Investors and their advisors thought they were well positioned to manage risk and preserve wealth by going beyond just stocks to invest in bonds, commodities, real estate, international equities and

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The S&P 500 Decison - SPY or IVV?

After the decision to invest in the ever popular market benchmark, S&P 500, investors have two options within the ETF universe for a pure play S&P 500 option, iShares IVV and the SPDR, SPY.  It seems that investors have made up their minds but is this decision optimal and which S&P 500 ETF is best suited for which kind of investor?

 

spy vs ivv assets

Structure is Everything

 

The SPDR fund, SPY, is the oldest and most traded ETF in the US.  When ETFs were first being created they all were Unit Investment Trusts (UITs)

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Trading ETFs

When investing in mutual funds, the investor is handing his money over to a mutual fund manager, giving him or her full discretion in trading the asset as he or she sees fit.   This is a simplified scenario, as behind the scenes there are usually a lot of internal and external controls put on the managers, but from the small investor's standpoint, he has no say in how the fund is run.

 

Exchange Traded Funds (ETFs) bring much more transparency to the table.  Instead of having no control and limited knowledge about what your investment assets are up to, ETFs allow you to know throughout the day what they hold and the value of those holdings.

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Switching to ETFs

In an environment where the stock market recovers and the credit crisis is in the rearview mirror, will your investments recover with the stock market, lag behind or remain at today’s levels? The investment tool you are using will make the difference.

Each quarter, Standard and Poors comes out with a report detailing how mutual funds performed compared to passive investments or indexes. Remember, ETFs are investment products that track indexes and are comparable with them. This report, the Standard and Poor’s Passive Verses Active Scorecard or SPIVA Scorecard, takes a unique view of how mutual funds performed verses indexes.

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Is Debt the New Equity?

As bond investors begin to experience never before seen risks, they are asking themselves if debt is the new equity.

Case in point - the investors who own the secured debt of Chrysler.  Even with the company teetering on the brink of insolvency, the bondholders felt confident that they would get most of their money back since they were first in line and the bonds are secured by land, machines and other hard assets.

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