ETFs are essentially investment vehicles that allow investors to purchase a basket of stocks that can target specific segments or sectors of the market, a very efficient and inexpensive ways gain exposure to the best performing sectors. Spyder Select S&P 500 ETFs are a great example.
(click on the charts for easier viewing)
Sector Select Spyder ETFs
 |
| GWM Model Portfolio currently hold XLF, XLV and XLI. |
Each of the market sectors represented by these ETFs come in and out of favor as time goes by. Utilities were top performers in early 2013, but faded badly in the second half of 2013. Financials and Healthcare are now leading the market.
Sector Rotation
GWM Model Portfolios are broken down into sub-components we call Folios. One of our Folios is called Sector Rotation.In the Sector Rotation Folio we want to invest in the leading sectors at the moment. We compare the relative performance of the sectors on a regular basis, systematically rotating into the best performing sectors.
S&P 500 Select Relative Strength Performance
10/01/2013 - 11/22/2013
 |
The Healthcare ETF (XLV) is leading.
The Utility ETF is lagging. |
Below is a Link for a short video explaining how ETFs work.
http://www.investopedia.com/video/play/understanding-etfs/
Definition of
'Exchange-Traded Fund - ETF'
A security that tracks an index, a commodity or a basket of assets like
an index fund, but trades like a stock on an exchange. ETFs experience price
changes throughout the day as they are bought and sold.
Investopedia explains
'Exchange-Traded Fund - ETF'
Because it trades like a stock, an ETF does not have its net asset value
(NAV) calculated every day like a mutual fund does.
By owning an ETF, you get the diversification of an index fund as well as the
ability to sell short, buy on margin and purchase as little as one share.
Another advantage is that the expense ratios for most ETFs are lower than those
of the average mutual fund. When buying and selling ETFs, you have to pay the
same commission to your broker that you'd pay on any regular order.
One of the most widely known ETFs is called the Spider (SPDR), which tracks the
S&P 500 index and trades under the symbol SPY.
This blog post does not constitute an offer of investment advice. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar.
The Growth sector is just beginning to re-assert itself after a bout of profit taking. I am adding back-in an allocation to the growth stock sector today.
