July ETF Performance Results

Prognosticating

By carefully selecting ETFs, the DIY investor can construct a well-diversified, low-cost, low-maintenance portfolio.  He or she will have a portfolio that in the past has outperformed most professional portfolios and, combined with a carefully thought-out asset allocation strategy, avoids the number one enemy of investors - emotion.

An important part of the  process is tracking performance.  Here is a resource from ETF Trends that reports returns on ETFs:

Source: www.etftrends.com

CLICK TO ENLARGE   Note that the table includes returns for 2011 and year-to-date 2012 through July - 2 periods investors have found challenging, especially hedge funds and state pension funds, as detailed in previous posts.

One feature I really like about the report is that it groups ETFs by asset category.  For the example, as shown, it has numerous fixed income ETFs grouped together so that it is easy to see how various parts of the bond market have performed.

Source: www.etftrends.com, p. 4

From this list, an investor can quickly  begin researching the expense ratios and characteristics of the underlying index by entering the ticker symbol into the quote box at Morningstar, for example.  The list includes ETFs indexed to various parts of the Treasury yield curve, high grade and low grade corporate ETFs, emerging and high-quality international and muni ETFs.

For the investor who can't resist trying to predict short-term performance on various market sectors, this is an excellent resource also with which to carry out this exercise on paper.  Just pick an ETF from various sectors and rank them.  For example, you might have SPX (large cap), VB (small cap), IEV (Europe), SDY (dividend), DBC (commodity), IAU (gold), and AGG (bonds).  Rank the sectors from 1 to 7, and next month you'll easily begin to see if you have any prognosticating talent.

Where Are Investors Putting Their Money?

Tracking investment flows is a popular pastime on Wall Street.  It is a way to get a sense of market thinking.  Exchange traded fund (ETFs) flows for June, as reported by the ETF Industry Association, showed the biggest inflows, as follows:

ETF	INFLOW	MARKET SECTOR	RETURN (%)
SPY	$3.6 bln.	S&P 500	7.66
QQQ	$1.4 bln.	NASDAQ	7.65
LQD	$1.3 bln.	INV. GRADE CORP. BONDS	1.3

 Biggest outflows:

ETF	OUTFLOW	MARKET SECTOR	RETURN (%)
VB	$.965 bln.	SMALL CAP STOCKS	10.42
SHY	$.65 bln.	1-3 YR. TREAS.  NOTES	-0.08
FXI	$.568 bln.	CHINA	4.27

*Returns are from Morningstar and are based on fund net asset asset value for the 30-day period ended 7/3/2012.

During the month, the Federal Open Market Committee announced a continuation of "operation twist" whereby they focus on investing in the longer maturity portion of the yield curve in lieu of shorter maturities.  It appears that this was impetus for investors to seek higher-yielding corporate bonds in this part of the curve.

For additional detail, see the Bond ETFs Remain Top Draw in June by Tom Lydon.

Some Year-To-Date ETF Returns

Here are some year-to-date returns on indexed exchange traded funds from Morningstar :

Vanguard Total Stock Market VTI +9.14%
Vanguard Europe Pacific VEA +5.47%
Vanguard Emerging Markets VWO +13.96%
Vanguard Total Bond BND +8.28%
Vanguard REIT Index VNQ +25.34%
SPDR Gold Shares GLD +21.59%
GSCI Commodity Index GSG -2.28%

Returns are based on NAV. To find performance numbers, go to the Morningstar site ; enter ticker symbol :

CLICK TO ENLARGE Click "performance" and scroll down.



CLICK TO ENLARGE

The funds' returns vary widely and may indicate a need to rebalance from, say, the REIT fund VNQ to the commodity index fund GSG, depending on the rebalancing band used.

Disclosure: the data here is for informational purposes only and is not intended as a recommendation. I hold some of the funds mentioned.

Some ETF Returns

Year-to-date returns, selected ETFs, and markets they track, thru 3/31/2010 taken from Bloomberg

BND +1.39% Total Bond Market
SPY + 5.42% S&P 500
AGG +1.61% Total Bond Market
LQD +1.27% Investment Grade Corporate Bond Market
JNK +4.33% Junk Bond Market