The announcement that Amazon.com Inc. (NASDAQ:AMZN) had made an offer to purchase Whole Foods Market Inc. (NASDAQ:WFM) sent the grocery stocks plummeting. While some experts think Amazon's move into the grocery business is a great idea, others aren’t so sold on the idea.
Regardless of whether this move by Amazon is good or bad for Amazon, the grocery sector was punished by this news and I don’t think stocks like The Kroger Co. (NYSE:KR) deserved to fall nearly 10% on the news. Or even Wal-Mart Stores Inc. (NYSE:WMT), Target Corporation (NYSE:TGT), Costco Wholesale Corporation (NASDAQ:COST) all losing billions in market capitalization just because Amazon is buying Whole Foods.
While there is certainly some additional risk associated with Exchange Traded Funds that offer currency hedging, investors looking for international exposure need to consider currency hedging ETF's as a viable option.
I am not normally in favor of ETF's that increase investors risk by using sophisticated investment strategies which increase leverage or offer hedged protection. These products are 'offering' this added feature at increased cost to the investor and usually more so than that at rather elevated risk levels.
In most cases I would argue that if you need to hedge against something, than why even invest in that sector at all? When it comes to foreign equities, it is hard to ignore the developed markets like Europe and Asia. But, the big risk of investing in those countries today is how fluctuations in the currency will affect your returns.
If your investment increases in value by say 10%, but the U.S. dollar compared to that foreign currency increases by 10%, then you have not made a single dollar. Your entire investment gain was wiped out by the currency exchange rate changing. The opposite can also happen; if your asset declines in value, but so does the dollar, than you haven’t lost anything. Continue reading "Currency Hedging ETF's; Why You Would Buy Them"→
As Exchange Traded Funds become more popular and more money flows into this asset class, it is inevitable that more ETF's will both open and unfortunately close. Currently there is more than $3 trillion in assets in ETF's spread across more than 2,000 different options to choose from.
In 2016 we saw 216 new Exchange Traded Funds. But we also saw 58 funds closed last year. While there can be a number of different reasons funds are closed, the bulk of ETF closures occur because of one of the following three reasons; a weak ETF issuer, low assets under management, or a low rank within its industry.
In 2012 cash in-flows returned positive and hit $200 billion, but the industry has seen declining in-flow ever since; $177 billion in 2013, $104 billion in 2014, a negative $101 billion in 2015 and even worse a negative $229 billion in 2016.
So you are now just a decade or so from retirement and don’t want another 2008 market crash to wipe out our nest egg, forcing you to work for longer than you are planning. Finding safe investment options is a goal, but at the same time you don’t want to be too conservative because you do need to continue realizing capital appreciation so your nest egg can support you during your 'golden years'.
The balance between safety and growth is more difficult than one may think. If you get too safe, the growth will lag and you may not have a large enough retirement account. If you get too focused on growth, you may be taking on more risk than you should, which could leave you vulnerable to a big market crash.
While Exchange Traded Funds offer diversity, I personally don’t like very many of the mixed portfolio options available today (a fund that holds a combination of investment options such as stocks, bonds, RIETS, MLP's, currency, futures, etc.) and especially don’t like the 'age based target funds' offer through many 401(k) plans and other mutual fund companies. Now I want to make it clear I am always a proponent of a well-diversified portfolio and I believe that idea holds true more so for those in this age group than investors who are younger.
With that being said, investors in their 50's should be thinking more about buying a few different ETF's, as opposed to the one-stop shops. I have found that the one-stop shop ETF's typically tend to be either too conservative or too aggressive and this causes them dramatically trail the market returns or be way too exposed to a market pull-back. Continue reading "ETF's For Those In Their 50's"→