Socially Responsible ETFs May Focus On More Than You Thought

With what seems like a never-ending flow of new Exchange Traded Fund options for investors to dump money into, one of the more popular, besides indexing, themes are the ‘socially responsible’ exchange traded funds. These funds focus on companies which are seen to be socially responsible. That could and often does mean many things, but for the most part, it represents companies which rate high on environmental, social, and corporate governance scales.

Firm meeting the environmental, social, and governance (ESG) criteria are also believed to have higher rates of return for investors because these companies are less likely to deal with government-imposed fines or just plain old bad publicity. But socially responsible ETF investing just doesn’t end with the ESG firms; it often excludes all companies that fall into the ‘sin stock’ categories. These would include, alcohol, tobacco, gambling, adult entertainment, weapons, and obviously now the marijuana companies. One ETF, which we will get to in just a moment even goes as far as focusing on companies which employ women in high-level leadership positions.

So, before you decide that socially responsible is just for ‘tree huggers’ and isn’t for you, take a look at a few of the ETFs I have highlighted below, and maybe one of them will strike a chord with you.

The first ETF on my list is the iShares MSCI KLD 400 Social ETF (DSI) which is one of the oldest ESG ETFs with an inception date of November 4th, 2006. Due to its long history, it is also one of the largest ESG funds with $1.4 billion in assets under management. However, DSI is in the middle of the range in terms of costs, as the fund carries an expense ratio of 0.25%. DSI tracks a market-cap-weighted index of 400 companies which are considered to have the highest positive environmental, social, and governance characteristics by MSCI. With that being said, Facebook (FB) is the second largest holding in the fund and with the companies ‘data’ scandals in its recent past, some would say the fund has too many holdings which don’t fully represent ‘true’ ESG principles. And because the fund is market-cap weighted, its top ten holdings represent 27% of the fund. So, with all that being said, DSI is an ESG fund, but not for the die-hards. So, if you on the fence about ESG investing, this is a good option to consider. Continue reading "Socially Responsible ETFs May Focus On More Than You Thought"

The Second Marijuana ETF Is Now Open For Business

The AdvisorShares Pure Cannabis ETF (YOLO), the second pure play Marijuana Exchange Traded Fund began trading on Thursday, April 18th, (it would have been fun if the market had been open on April 20th). The fund is a direct competitor to the ETFMG Alternative Harvest ETF (MJ), the only other US traded marijuana ETF.

(It should be noted that the AdvisorShares Vice ETF (ACT) also is heavily invested in marijuana and cannabis stocks, but it also has a large percentage of its portfolio in tobacco and alcohol-related business, which have no connection to the marijuana industry).

The two funds will be direct competitors, but not because they are investing in the same companies due to the differences in each fund’s principal investing strategy based on their ‘Fund Prospectus,’ but solely because they are the only two ETF’s primarily focusing on cannabis-related businesses.

YOLO’s fund prospectus states the following; Continue reading "The Second Marijuana ETF Is Now Open For Business"

IPO ETFs A Better Way To Play Lyft, UBER, And Other Hyped Listings

The IPO market is back on fire and investors are once again falling over each other trying to get a piece of the newest publicly traded companies. The recent initial public offering of Lyft (LYFT) is a perfect example of why investors really should avoid getting caught up in the hype of a big IPO. To see why all you need to do is look at the stock chart of Lyft and see how it has fallen after its amazing ‘pop’ on its first day of trading.

The stock has a high of $88.60 per share, but is currently trading below the $60 per share range and has fallen as low as $54 per share. Lyft is not the only example of this flawed IPO process. Facebook (FB), Snap (SNAP), Blue Apron (APRN), DropBox (DBX) are just a few of the other bigger name IPOs that have had lots of hype surrounding them and nice jumps on the first days of trading but soon fell out of favor with investors. With Facebook, while it may have taken some time to gain traction, the stock did come back from its post IPO fall and has performed well for investors, but the others have yet to do so.

The issue with heavily hyped IPOs is that the companies rarely live up to the hype and the stock soon falls below IPO prices as investors realize growth and actual fundamentals of these companies don’t match the pre-IPO hype.

Now, this isn’t to say that all IPOs are failures. Roku (ROKU), DocuSign, (DOCU), BJ’s Wholesale Club (BJ) are all examples of recent IPOs that are trading higher than their initial public offering price and have rewarded shareholders.

So, you may be wondering how you filter out the IPO winners and loser? Continue reading "IPO ETFs A Better Way To Play Lyft, UBER, And Other Hyped Listings"

A Few New Retail ETF Investing Options

Recent data reports and economic indicators have been mixed when it comes to the health of the American consumer. This has led some investors to think retail stocks are undervalued, while other investors believe they are overvalued. So whether you fall into the camp that thinks the next recession is “just right around the corner” or that the poor retail sales figures reported in December were not a sign the economy is struggling, but simply a blip in the data caused because of the government shutdown; there are a few newer Retail ETFs which give you the option to invest regardless of the way you think the market is headed.

The first place to start looking if you want to be long retail is with the SPDR S&P Retail ETF (XRT). The XRT would be most investors first choice if you are looking for plain vanilla long Retail ETF investing. XRT has been around since 2006; it has a lower than average expense ratio, when compared to others on this list, at 0.35%. IT has $250 million in assets, 96 holdings and is equally-weighted and draws stocks from the S&P Total Market Index, not just the S&P 500. It also invests in both e-commerce retailers and brick-and-mortar retailers.

Since most people would agree retails future is more online, the most basic ‘online’ Retail ETF is the Amplify Online Retail ETF (IBUY). IBUY has an inception date of April 20th, 2016, and offers equally weighted, well-diversified exposure to global online retailers. Firms must derive 70% of their revenues from online sales and can be any size in terms of market-cap (subject to the standard typical minimum size and liquidity constraints). The fund has 75% of its assets in US-based companies and 25% in foreign stocks. IBUY has an expense ratio of 0.65%, which is on the ‘high’ side, but considering the exposure the fund offers, it is not unreasonable. IBUY currently has $275 million in assets spread out over its 42 different holdings, which have a weighted average market cap of $52 billion. Wayfair (W), Etsy (ETSY), eBay (EBAY) and PayPal (PYPL) are four of the funds top 10 holdings, with none representing more than 5% of the fund. Continue reading "A Few New Retail ETF Investing Options"

ETF 'Fee War' Could Help You Realize A Larger Portfolio Balance

With more than 2,200 Exchange Traded Funds available to investors, fund managers are now finding that the lower they go in terms of fee’s, the more money they can attract. This isn’t a new idea as it was first spearheaded by the great late Jack Bogle, best known for his work at Vanguard and the man who is largely credited with the first index fund.

Bogle’s idea back then was that if he could get fund fee’s lower, he would be able to attract more money to the fund and therefore, in the long run, make more money for both his clients and his firm. Even decades after Jack changed the game for investment managers by slashing fee’s; Vanguard is still pushing the envelope on how low they can go. Recently the company filed regulatory documents showing that they were cutting the expense ratio on a number of ETFs; Vanguard Total Bond Market ETF BND (BND), Vanguard FTSE All-World ex-US VEU (VEU), Vanguard FTSE Europe ETF VGK (VGK), Vanguard FTSE Pacific ETF VPL (VPL), Vanguard Tax-Exempt Bond ETF VTEB (VTEB), Vanguard FTSE Emerging Markets ETF VWO (VWO) and Vanguard Total International Stock ETF VXUS (VXUS).

The move is the latest in what many have dubbed the ‘fee war’ which is taking place between fund managers. There is currently a handful of ETFs that have expense ratios as low as 0.03% two of which are managed by State Street Global Advisors and another two which are managed by Charles Schwab. There are three times as many ETFs with fees of 0.04%, and more than 150 with fees at or below 0.10%.
Continue reading "ETF 'Fee War' Could Help You Realize A Larger Portfolio Balance"