Mutual Funds Rush To Join The ETF Movement Via Active Offerings

Ulli ETFs on the Cutline Contact

The WSJ reports in “Mutual Funds Race to Join ETF Fray” (subscription required) that mutual fund companies are accelerating their efforts to join the spreading ETF movement:

After watching the exchange traded fund industry streak past $1 trillion of assets recently, a host of mutual-fund companies are stepping up their efforts to get into the game—with a more active but pricier product for investors.

Fund giants from Eaton Vance to Blackrock iShares have gotten regulators’ approval to roll out what the industry calls more actively managed ETFs. Janus, AllianceBernstein and Dreyfus have sought permission. Last month, Pimco said it would launch an ETF version of its $240 billion Total Return fund.

They are seeking to join the still-small group of actively-managed ETFs: funds that trade all day long on an exchange like stocks, but with underlying investments that are chosen, and traded, by a pro. Companies tout their market-beating potential—and charge more for the promise of added returns.

Fans say the new breed of ETFS will give investors a chance to juice returns at a still relatively low price.

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Is There Such A Thing As A ‘Reliable’ And ‘Safe’ ETF?

Ulli Reader feedback Contact

This was the question on reader Daniel’s mind as he emailed the following:

I am retired and looking for a “reliable & safe” dividend paying ETFs for income.

Three ETFs that I have looked at are:

1. SDY – Tracks HY Div Aristocrats Index 2. VIG – tracks Mergect Div Achievers Index 3. DVY – tracks DJ Select Div Index 4. Others?

What is your recommendation?

Let’s first hone in on the word ‘reliable’ on Daniel’s wish list. I assume that he means reliable in terms of providing a regular income stream. If you look at the dividend histories of SDY, VIG and DVY, you can see that they indeed paid their dividends on a regular basis.

The more difficult determination to evaluate is whether any of these ETFs are ‘safe.’ Daniel was very vague, so here again I have to assume that he refers to price stability. The short answer is sometimes prices are stable and sometimes they are not and plunge.

Let’s take a look at a five year chart (courtesy of YahooFinance) of Daniel’s ETF selections:

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ETF/No Load Fund Tracker For Friday, May 27, 2011

Ulli ETF Tracker Contact

ETF/No Load Fund Tracker StatSheet

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THE LINK TO OUR CURRENT ETF/MUTUAL FUND STATSHEET IS:

https://theetfbully.com/2011/05/weekly-statsheet-for-the-etfno-load-fund-tracker-updated-through-5262011/

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Market Commentary

Friday, May 27, 2011

AGAINST THE WIND

It was a repeat performance of the prior week, as the markets started out to the downside on Monday and spent the last four trading days trying to climb back. In the case of the S&P 500, it was aimless meandering within a narrow trading range as the index ended up giving back 2 points.

The entire month, the major indexes have been tiptoeing on a balance beam, and it appeared that at anytime the downside could come into play big time. It did not happen yet, but even Dr. Doom, Nouriel Roubini, chimed in with a similar tune in “Stocks teetering on ‘tipping point’ of correction.”

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Weekly StatSheet For The ETF/No Load Fund Tracker – Updated Through 5/26/2011

Ulli ETF StatSheet Contact

ETF/Mutual Fund Data updated through Thursday, May 26, 2011

If you are not familiar with some of the terminology used, please see the Glossary of Terms.

1. DOMESTIC EQUITY MUTUAL FUNDS/ETFs: BUY— since 6/3/2009

As announced via a blog post, on 6/2/2009, the TTI triggered a buy signal with an effective date of 6/3/2009. We will use the 7% trailing stop loss of our positions as an exit point or the crossing of the trend line to the downside, whichever occurs first.

As of today, our Trend Tracking Index (TTI—green line in above chart) has broken above its long term trend line (red) by +4.62%.

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High Volume ETFs On The Cutline – Updated Through 5/25/2011

Ulli ETFs on the Cutline Contact

This past week’s pullback in the markets clearly affected the High Volume ETFs as well. To clarify, High Volume (HV) ETFs are defined as those with an average daily volume of $10 million or higher.

These ETFs are generated from my selected list of 90 that I use in my advisor practice. It cuts out the “noise,” which simply means it eliminates those ETFs that I would never buy because of their volume limitations.

When markets correct, you can easily spot the results around the cutline (trend line), especially with those ETFs that have marginal momentum figures to begin with. They are the first ones to succumb to bearish forces. As a result, downward momentum pushed some ETFs below the yellow line and others deeper into bear market territory.

Here are some of the more dramatic moves:

Singapore (EWS) from +20 to +9

Spain (EWP) from +18 to +6

Emerging Markets (VWO) from +12 to +4

Slipping below the line were the following:

South Africa (EZA) from +8 to -1

China (FXI) from +4 to -2

Russia (RSX) from +3 to -3

If you look at the table, you’ll notice that currently only 1 equity ETF offers a buying opportunity, because of its positive momentum numbers all the way across and a low DrawDown (DD% column):

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