iShares Dow Jones EPAC Select Dividend Index: IDV

iShares Dow Jones EPAC Select Dividend Index (IDV) is a relatively smaller ETF with just $47.26 million of assets under management. As the name suggests it tracks an index that is based on high dividend yield stocks. It is invested in stocks that are outside US and are primarily present in Australia, UK and Hong – Kong.

The EPAC in the name stands for Europe, Pacific, Asia and Canada. This index tracks high – dividend yield stocks in the developed world excluding US.

This means that the iShares IDV ETF holds stocks in currencies other than the USD and the investors do face currency risks along with the other usual risks while investing in equities.

The iShares IDV ETF is a passive investment vehicle, which means that it aims to track the performance of the underlying index by staying invested in its stocks.

The iShares IDV Dow Jones ETF has an expense ratio of 0.50%. It holds 98 stocks and has a P/E ratio of 8.58.

The fund has returned -39.23% since inception and the reason for that is the index is heavily weighted towards financials.

Here is a look at the top holdings of iShares IDV Dow Jones ETF:

Sector Breakup

Financials: 27.67%

Industrials: 19.15%

Consumer Services: 15.96%

Basic Materials: 9.93%

Oil & Gas: 9.87%

Telecommunications: 4.43%

Consumer Goods: 4.19%

Utilities: 4.10%

Technology: 3.68%

S-T Securities: 0.04%

Among the sectors, here is a list of the top stock holdings.

Top Stock Holdings

Commonwealth Bank of Australia: 4.26%

Vtech Holdings Ltd: 3.47%

Incitec Pivot Ltd: 3.27%

Providential Financial Plc: 3.18%

Wesfarmers Ltd: 3.04%

ENI SPA: 2.82%

PPR: 2.67%

Westpac Banking Group: 2.17%

Close Brothers PLC: 2.08%

Holdings by Country

Australia: 29.90%

United Kingdom: 14.64%

Hong Kong: 10.33%

Finland: 7.99%

Singapore: 6.40%

France: 6.37%

Italy: 6.14%

Source: iShares Fact Sheet

Oil ETF List

After gold ETFs, I thought I’d create an oil ETF list too. So, here is a comprehensive list of oil ETFs.

Oil ETF that own Oil Stocks

1. Oil Service HOLDRS T (OIH): The OIH ETF owns stocks of companies in the oil industry. These companies are engaged in provided drilling, well site management and other related products and services.

2. iShares Dow Jones U.S. Oil & Gas Exploration & Production Index Fund (IEO): This oil ETF owns the stocks companies in the Dow Jones US Oil and Gas Index. The top holding of this ETF is Occidental Petroleum Corp. You can see the other holdings at this link.

3. iShares Dow Jones US Oil EquipmentÂ & Services (IEZ): This ETF is not exactly an oil ETF but it holds the stocks of companies that manufacture oil equipment or provide oil services. The top holding of this ETF is Schlumberger Co. Ltd. You can click here to view the top holdings of this ETF.

4. SPDR S&P Oil & Gas Equipment & Services (XES): This oil ETF is like IEZ and its top holding is Schlumberger as well. You can click here to view all the top holdings.

5. SPDR S&PÂ Oil & Gas Exploration & Production (XOP): This oil ETF is owns stock in the oil and gas exploration business. Its top holding in Exxon Mobil and you can see its top holdings here.

Oil ETF that own Future Contracts

6. United States Oil (USO): USO is one of the more popular oil ETFs, which tracks the price of West Texas Intermediate light, sweet crude. The ETF invests in future contracts and options in order to track these prices.

7. United States Heating Oil (UHN): This oil ETF invests in future contracts and options in order to track the prices of heating oil delivered at the New York harbor

8. United States 12 Month Oil (USL): This oil ETF tracks the changes to the light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the changes in the average of the prices of 12 Futures Contracts on crude oil. It does that by owning oil futures contracts and other oil related futures, forwards, and swap contracts.

9. iPath S&P GSCI Crude Oil Total Return Index ETN (OIL): This is an ETN and not a ETF, which tracks the return of West Texas Intermediate (WTI) crude oil futures contract.

10. PowerShares DB Crude Oil Long ETN (OLO): This ETN is designed to track the return of Deutsche Bank Liquid Commodity Index, which in turn tracks crude oil futures contracts and US 3 month T Bill contracts.

Short Oil ETF

11. PowerShares DB Crude Oil Short ETN (SZO): This ETN will go up when oil goes down and will track the inverse of Deutsche Bank Liquid Commodity Index.

12. PowerShares DB Crude Oil Double Short Exchange Traded Note (DTO): This ETN will go up twice as much as the price of oil goes down, as measured by the Deutsche Bank Liquid Commodity Index

13. ProShares UltraShort DJ-UBS Crude Oil (SCO): This fund seeks daily investment results, that correspond to twice the opposite of the daily performance of The Dow Jones-UBS Crude Oil Sub-Index.

Double Oil ETF

14. The PowerShares DB Crude Oil Double Long ETN (DXO): This ETN goes up twice as much as the price of oil, as reflected by the Deutsche Bank Liquid Commodity Index.

15. ProShares Ultra DJ-UBS Crude Oil (UCO): This ETF seeks daily investment results that correspond to twice the daily performance of the Dow Jones-UBS Crude Oil Sub-Index.

Terminated Oil ETF

I came across the fact that two oil ETFs – Macroshares Up and Macroshares Down have been terminated because their deposits dwindled to less than 50 million dollars, and I thought a few people might be interested in knowing this too (actually I had spent time researching it and didn’t want that effort to go waste).

List of Gold ETFs

There is a lot of interest in Gold ETFs these days and since I have already created an exhaustive list of gold mutual funds with their expense ratios, I thought I’d create a list of gold ETFs too. This list has ETNs also, which sound similar to ETFs but are a different product. To know more about ETNs click here.

Gold ETFs that Own Physical Gold

SPDR Gold ETF (GLD): This fund actually holds physical gold.
iShares Comex Gold Trust (IAU): This is a gold ETF about which I have written in the past, click here to read that post. This ETF also holds physical gold.

Gold ETFs that Own Gold Mining Stocks

Market Vectors Gold Mining ETF (GDX): This fund holds stocks of gold mining companies from around the world.

Gold ETFs that own Future Contracts

Powershares DB Gold Fund (DGL): This fund holds future contracts which reflect the upwards price movements of gold.
E-Tracs CMCI Gold Total Return ETN (UBG): This is an ETN and tracks the upwards price movement of gold.

ETF Double Gold

Proshares Ultra Gold (UGL): This fund will give you daily returns and will move double the price of gold in a day.
Powershares DB Gold Double Long ETN (DGP): This is an ETN that moves double the gold prices.

Gold Short ETFs

PowerShares DB Gold Short ETN (DGZ): This is an ETN that moves up when gold prices go down. So, this works like a gold short ETF where, if the price of gold moves down by 2%, this ETN will go up by 2%
PowerShares DB Gold Double Short ETN (DZZ): This is also an ETN that moves up double the amount that gold prices go down. So, if gold prices go down by 2% this fund will move up by 4%.

ETF Gold India

Kotak Gold ETF (KOTAKGOLD): This is Kotak’s Gold ETF that tracks the price of Gold in India. The ticker is for NSE.
UTI Gold ETF (GOLDSHARE): This is UTIs ETF that tracks the price of gold in India. The symbol is GOLDSHARE and is for NSE
Reliance Gold ETF (RELGOLD): This is the Reliance Gold ETF that tracks the price of gold in India and the symbol RELGOLD is for NSE.

If you are interested in gold ETFs in India in particular then this page has a list of all the Gold ETFs traded in India, and this one shows you the two year performance of gold ETFs in India.Â I did a small piece on the expense ratios of two new gold ETFs – HDFC Gold ETF, and ICICI Prudential Gold ETF, which may also be of use to you.

Other investors find the page about gold mutual funds quite useful.

What Is An Inverse ETF?

Inverse ETFs are a class of ETFs that rises in value when their underlying asset falls. For example, the ProShares Short QQQ ETF (whose underlying asset is the NASDAQ) will rise, if the NASDAQ falls. So, if you expect companies in the NASDAQ to perform poorly, you could buy the ProShares Short QQQ. Recently, Inverse ETFs are gaining in popularity because the overall sentiment of the market is bearish, and everything seems to be going down (except the unemployment numbers).

Types of Inverse ETFs

Although Inverse ETFs are a relatively new phenomenon, there are already many Inverse ETFs that cover almost all major indices and sectors. This means you can pick a class that you are bearish on, and buy an appropriate Inverse ETF. For example, if I think that the financial sector is doomed, and I want to go short on the whole sector, I can buy the ProShares UltraShort Financials ETF, which bets against the Dow Jones U.S. Financial Index.

Similarly, there are other ETFs that short the Consumer Services Sector, Industrial Sector, Technology Sector, Oil and Gas Sector and also other classes like Emerging Markets, etc.Â You name it, they have it.

Inverse ETFs Can Be Leveraged

Thanks to Lehman, leverage is no longer a financial jargon, but has entered the lexicon of the common man. Many Inverse ETFs are leveraged and aim to return twice or thrice the fall in the index value. For example, ProShares UltraShort Financials ETF gains 10%, if the underlying Dow Jones Financials index falls by 5%. The ETF will gain twice the amount that the index falls, and vice versa.

One way of doing this is by employing leverage.Â However, this is quite dangerous because the risk of counter party default is very high in todayâ€™s economy. And thereâ€™s also a bigger risk with leverage when combined with another phenomenon known as Daily Returns.

Inverse ETFs Seek Daily Returns

Daily Returns mean that the fund value at the end of each day becomes the base value of the next day. Suppose, you invest in an UltraShort Inverse ETF, which aims to return twice the fall of the underlying index, a hypothetical situation can look something like this:

Day	Index	Inverse ETF
1	100	100
2	95 (down 5%)	110 (up 10%)
3	100 (up 5.26%)	98.42 (down 5.26 x 2 = 10.52%)

Basically, the index didnâ€™t move at all after three days, but you lost money! I have taken an example in which the ETF loses money (just to drive home the point), but you can make money with zero change in the underlying index in a given period as well.

Inverse ETFs Are Not Meant for Hedging

Be wary of using leveraged Inverse ETFs to hedge your position, because leveraged ETFs are not good for hedging as explained above.

Inverse ETFs Are Ideal for Short Term Trading

Inverse ETFs are best for short-term trading, if you have a bearish view on a particular segment in the market.

Some other benefits of Inverse ETFs:

You can short the index, but are exposed to only the amount you invested in the ETF.
You donâ€™t need a margin account, which is normally needed to short.
You donâ€™t need to buy fancy options in order to take a bearish view of the market.
You can take advantage of the volatility of the market.
You can buy a leveraged Inverse ETF, and increase your odds of a large profit with a small loss.

Bottom line

If you have a bearish view of the market, and want to trade short-term this product is good for you.Â However, if you shun volatility or if you are more of a long-term investor, then you should not dabble in this product.

This post originally appeared on Moolanomy

iShares S&P North American Natural Resources Sector Index Fund: IGE

iShares S&P North American Natural Resources Sector Index (IGE) is an equity ETF that tracks an index based on US traded natural resources related stocks.

iShares IGE ETF is a passive fund and seeks to replicate the performance of the underlying index. At any given point, it invests about 90% of its assets in the underlying index related stocks.

The iShares IGE ETF has a total operating expense of 0.48%. The iShares IGE ETF may declare and pay out a dividend semi-annually and if there are any capital gains from sales of its assets, it may pay that at the end of the year.

The ETF has about 1.24 billion dollars worth of assets under management and its P/E Ratio was 13.31 as on 5/15/2009.

Top Stock Holdings

Chevron: 6.93%

Exxon Mobil: 6.75%

ConocoPhilips: 6.06%

Schlumberger Ltd: 5.25%

Occidental Petroleum: 4.87%

Encana Corp: 3.29%

Barrick Gold Corp: 3.06%

Goldcorp Inc: 2.63%

Newmont Mining Corp: 2.37%

Apache Corp: 2.32%

Top Sectoral Holdings

Oil Gas & Consumable Fuels: 64.87%

Metals and Mining: 15.58%

Energy Equipment & Services: 14.36%

Containers and Packaging: 2.74%

Paper and Forest Products: 1.23%

Construction Materials: 1.07%

S-T Securities: 0.09%

Source: iShares Fact Sheet

Conclusion

The iShares IGE ETF is a good passive investment vehicle for people who are looking for investing in natural resources related stocks. While it is concentrated in the Oil and Energy sector, it has very little exposure to any single stock and that helps hedge risks against the declines in stock prices of a single company.

iShares S&P GSCI Commodity Indexed ETF: GSG

iShares S&P GSCI (GSG) ETF is a fund that aims to track returns of a particular S&P index (S&P GSCI Index) that represents a diversified set of commodities.

The iShares GSG ETF holds future contracts, which track the value of the commodities held in the S&P GSCI Index.

Underlying Index: S&P GSCI Index

In order to understand how the iShares GSG ETF will move, you need to know the underlying assets of the index it tracks.

So, here is the breakup of the futures contract currently included in the S&P GSCI with their percentage dollar weights on February 27^th 2009:

WTI Crude Oil: 33.74%

Brent Crude Oil: 12.38%

Natural Gas: 5.91%

RBOB Gas: 4.82%

Wheat: 4.66%

Corn: 4.57%

GasOil: 4.33%

Heating Oil: 4.16%

Gold: 3.72%

Live Cattle: 3.69%

Soybeans: 3.04%

Copper: 2.66%

Aluminum: 2.35%

Sugar: 2.19%

Lean Hogs: 1.89%

Red Wheat: 1.00%

Cotton: 0.99%

Coffee: 0.90%

Feeder Cattle: 0.68%

Primary Nickel: 0.61%

Zinc: 0.55%

Cocoa: 0.42%

Silver: 0.40%

Standard Lead: 0.36%

As you can see, this index is heavily weighted towards oil and gas, which form about 65% of the total assets.

The prospectus explains that the index is calculated in the following manner:

The quantity of each of the contracts included in the S&P GSCI^TM is determined on the basis of a five-year

average, referred to as the “world production average”, of the production quantity of the underlying commodity as published by the United Nations Statistical Yearbook, the Industrial Commodity Statistics Yearbook and other official sources.

This means that unless there is a substantial change in the output of any of these commodities – there won’t be a substantial change in the composition of this index.

Operating History and Performance

iShares GSG ETF has an operating history from June of 2006 and its investing pool has grown from $7.35 million in June 2006 to $466.23 million at 31^st December 2008.

The iShares GSG ETF has a management fee of 0.75% and has a beta of 0.98 with the S&P 500. The trust has returned -21.80% since inception.

The iShares GSG ETF tracks the return of its underlying index by investing its funds in the long positions future contracts on the S&P GSCI Excess Return Index, called CERFs.

Here is a look at its price movement since inception.

Conclusion

Most investors stumble upon the iShares GSG ETF, when they are looking for a fund that will help them invest in commodities.

Different people have different things in mind when they think of commodities, some think of precious metals like gold and silver and others think of copper and zinc. But, the underlying index of GSG weighs heavily towards Oil and Gas.

So invest in this fund, only if you were looking for an investment vehicle that tracks the price of oil and gas for the most part.

If you had a specific commodity in mind (other than oil), then you may want to pass this ETF and look for something that invests in the specific commodity (or commodity class) you had in mind.

Gold ETF: iShares Comex Gold Trust (IAU)

iShares Comex Gold Trust (IAU) is a Gold ETF, which holds physical gold as its underlying asset and moves in tandem with gold prices. The sponsor of IAU is Barclays Bank and it trades on the NYSE ARCA. As the sponsor — Barclays has appointed The Bank of New York as the trustee and it is responsible for the day to day administration of the trust.

The Bank of New York has further appointed The Bank of Nova Scotia as the custodian and it is responsible for the safekeeping of the gold owned by the trust.

structure-of-ishares-iau1

IAU Backed By Physical Gold

IAU holds stock of physical gold which is held by the custodian near New York, Montreal, Toronto and London. There are different types of commodity funds — some that create future contracts to reflect the price movement in the underlying asset, others hold stocks of mining companies and some actually hold the underlying physical asset. IAU falls under this category.

IAU: Expense Ratio

IAU has an expense ratio of 0.4% and compares favorably to other gold funds and their expense ratios.

IAU is a Passive Investment Vehicle

IAU is passive in nature and it doesn’t engage in gold trading. To that extent — this investment should be strictly viewed as a proxy for buying gold. If you are looking for a gold mutual fund that actively engages in trading the commodity and earn profits — over and above gains in gold prices — then this is not the right investment vehicle for you.

Factors Affecting Gold Prices

Gold and the Dollar

Gold has rallied in the recent past with the anticipation that the Fed’s printing press will cause inflationary pressures and lead to a crash in the value of the dollar, and people have been buying gold to protect themselves from the dollar crash, as historically, there has been an inverse relationship between the value of the dollar and gold prices.

iau-price-movements

Gold: Demand and Supply

In 1998: 2,574 tonnes of gold were mined globally. This figure has slightly declined to 2,476 tonnes in 2007. So, in the last ten years or so — gold mining has been stagnant and even witnessed a marginal decline.

At the same time the total fabrication (major demand component) declined from 3,737 tonnes in 1998 to 3,072 tonnes in 2007.Â So, even though supply fell, demand fell at a faster rate.

This is an interesting trend, but since gold is a precious metal — the simple equation of demand and supply for fabrication is more of an indicator, than a decisive factor determining the direction gold prices. Other factors like dollar declines, stock market downturns etc. play a significant role in determining the price of gold.

On to IAU itself, it is a good vehicle for someone considering passive investment in gold but who doesn’t wish to hold physical quantity for whatever reason.

Disclaimer: I don’t own IAU at the time of writing

Hedge Fund ETF: IndexIQ (QAI)

The IQ Hedge Multi Strategy Tracker ETF (QAI) or as it is being commonly referred to — the shiny new Hedge Fund ETF has generated a lot of interest lately.

I think this has more to do with the branding of the fund, than the fund itself. This fund seeks to generate returns that are similar to a Hedge Fund.

This doesn’t mean that QAI invests in hedge funds directly. Only that it uses strategies that will generate hedge fund like returns.

What are Hedge Fund Like Returns?

Index IQ has created a — IQ Hedge Multi Strategy Index – which tracks third party index showing hedge fund returns.

This index has been created with underlying funds that look to replicate six major hedge fund strategies:

Long Short Equity
Global Macro
Market Neutral
Event Driven
Fixed Income Arbitrage
Emerging Markets

The fund will replicate the hedge fund returns by investing in several ETFs and other financial instruments. QAI is passive in nature and comes with a relatively low expense ratio of 0.75%.

Fund of Funds

QAI is like a fund of funds and it will invest 80% of its net assets plus any amount it borrows for investing in its underlying index funds.

This basically boils down to investing 80% of QAI’s net assets in pre-determined ETFs. These investments will include ETFs, Inverse ETFs and Ultra Inverse ETFs.

The remaining 20% will be invested in assets that don’t fall under the underlying index. This can be other ETFs, ETNs, Publicly Traded Commodity Pools or directly in the components of its underlying index funds. In addition to these, QAI can also invest in the following type of financial instruments:

Future Contracts
Swap Agreements
Forward Contracts
Reverse Repos
Options

Top Holdings

QAI holds about 77% of its assets in 6 funds and the remaining 23% are spread across other funds. Here is a break – up of the top holdings of QAI.

qai-weight

As at 03/27/2009

QAI will balance its portfolio at the end of every month and will re-allocate assets based on the market conditions.

Conclusion

The thing that jumped out at me was that they were really bent towards debt instruments. If a large part of their portfolio is invested in debt and continues to be like that — then why not buy the underlying debt instruments instead?

If on the other hand, they change their asset allocation in a few months and even then show a favorable result — this fund might become interesting. For now, it is too early to make a call or or even contemplate investing in this for me.

Disclosure: I am not invested in this at the time of writing.

Silver ETF: iShares Silver Trust (SLV)

iShares Silver Trust (SLV) is the world’s larget silver ETF backed by physical stock of silver bullion.Â It trades on the NYSE Arca and is a good option for investors looking to invest in silver by means of an ETF. The sponsor of iShares Silver Trust (SLV) is Barclays Bank.

Backed by Physical Silver Bullion

As on March 23rd the iShares Silver Trust (SLV) held 8,180.44 tonnes of silver. This stock of silver is stored at SLV’s custodian — JP Morgan Chase.

Some commodity funds not only hold the underlying commodity, but, on top of that — trade on the futures contracts of that commodity on exchanges like COMEX. SLV doesn’t do this. SLV takes delivery of physical silver, which complies with London Bullion Market Association (LBMA) silver delivery rules.

There are other silver fundsÂ which take positions in silver by buying stock of silver mining companies. SLV doesn’t do that either.

Passive Investment Vehicle

This means that SLV is a passive investment vehicle and the price of the fund moves in tandem with silver prices. There are no fancy hedging or other active management techniques used by this silver ETF. The lack of active management means reduced expenses and fees.

SLV Price Movement

Here is a look at how the SLV ETF moved since September 2008. There was a 10:1 split on 21st September, so I am not including the chart which includes prices before that date.

slv1

Silver Mining vs Supply

In the past seven years — silver mining has increased from 591 million ounces in 2000 to 670.6 million ounces in 2007, which is a growth of 13% at a CAGR of about 1.82%

At the same time the total demand has risen from 824 million ounces to 894.5 million ounces, which is an increase of 8.5% at a CAGR of 1.18%

The gap between total demand and total supply is matched by:

Net Government Sales
Old Silver Scrap
Producer Hedging
Implied Net Investment / Disinvestment

Source: World Silver Survey 2008

Silver Demand Segments

While silver is generally thought of as a precious metal, its industrial use exceeds its use in jewelery and coins. Here is a break-up of 2007 silver usage segments:

silver-usage1

This chart shows that the demand for physical silver is likely to be more stable than other precious metals like gold, which have a large component of discretionary spending built into their demand.

Source: World Silver Survey 2008

Silver Rally

Precious metals like gold and silver are getting increasingly popular because they are seen as effective hedges against stock market downturns. Like gold, silver is considered a good hedge against the stock market, as investors flock to safety in times of uncertainty.

The quantitative easing that the Fed is currently employing is expected to result in massive inflation and fall in the value of dollar. This is another reason precious metals like silver are gaining in popularity and seeing a rally.

Conclusion

The iShares Silver Trust (SLV) ETF is a good option for anyone who wants to invest in silver, but is not interested in holding huge quantities of physical silver. However, the prices of gold and silver have already gone up quite considerably and given the enormous interest in these metals lately — this may just be where the next bubble is forming.

Disclosure: At the time of writing I don’t hold any positions in SLV.

If you are buying a Target Retirement Fund: You can’t buy anything else

Target Retirement Funds – function on the principle that you should invest in equity, while you are young, and move towards debt, as you get older.

Since such funds are – fund of funds, when you buy a Target Retirement Fund, you are effectively buying the funds that your Target Investment Fund invests in.

But, more than that; you are buying into the idea that your savings should be invested in a certain ratio of debt and equity.

If you buy that idea, and have decided that a particular fund offers you a good mix, then you have to invest all your savings with that fund.

If you don’t invest all your savings with that fund, then you skew your ratio of debt and equity from the one you believed: best for you.

And, if you skew that ratio, then you really don’t buy into the idea that a particular ratio is good for you.

The only exception to this is – when you knowingly buy a Target Retirement Fund that has a ratio, which you are not satisfied with. For example a fund that invests 80% in equity and 20% in debt, when you would like only 70% of your savings in equity. To correct that ratio – you need to buy additional debt funds, and balance your portfolio.

The question is – if you have to manage your asset allocation, after buying a Target Retirement Fund, does it really make sense to buy a fund – whose purpose is providing the right asset allocation, in the first place?

How hard is it to buy the funds that your – Target Retirement Fund – will own on your behalf, and then keep investing in those funds directly every year? It can’t be much more difficult than buying additional funds to balance your asset allocation.

If you have invested in a Target Retirement Fund, and have more money invested in other instruments, you might want to re-think that decision, and consider owning the funds that your Target Retirement fund owns on your behalf.