ETF Expert

If you look at most individual stock selections by so-called pros, you will discover that few pros outperform comparable benchmarks over 5 to 10 years. It’s so rare, in fact, that we find ourselves celebrating the handful of gurus who have managed to beat the S&P 500 on a risk-adjusted basis.

If you do not believe it, you can check for yourself. Check out how each stock has done against a comparable index fund for the last 5 years. (What’s more, take a look at an individual stock’s volatility!)

How about Microsoft or Intel versus the Technology Select SPDR (XLK)?  You’d have been better off with the index fund, XLK.

What about "Big Energy?" Couldn’t Exxon Mobil or Chevron out-hustle the Energy Select SPDR (XLE)? Nope.

Sure you will have successes. Yet, when you add up all of your successes and all of your "not-as-good-as-the-index" results, you simply spend too much time. (And you make less money.) This is one of the chief reasons for using exchange-traded funds (ETFs).

Of course, there are exceptions to my rule. There are times when Jim Cramer’s mantra to go with the "best of breed" in every category is preferable. And the perfect example rests with Google (GOOG).

For as long as I’ve written about ETFs, both here on ETF Expert and elsewhere, I’ve lamented the fact that Google only appears in one of the Internet ETFs, the First Trust Internet Index (FDN). And while its inclusion is a plus, all of the Internet indexes, including FDN, fall way short.

Even with a "dot com" bust at the turn of the century, does anyone really feel that the Internet is just a fad? Is it going away anytime soon? Or are we seeing a world wide web that’s been nothing short of explosive?

Simply stated, there’s nothing that people don’t do on the Internet these days. And if there’s one name that’s synonymous with everything we do on the web, it’s certainly Google (GOOG). Google is the "best in breed" in brand recognition, advertising revenue, search technology… heck Google is the Internet!

In my opinion, Google better represents the triumphs and failures of the Internet sector than any Internet index out there. We need to look no further than the chart below for the proof.

So every now and again, there will be a mutual fund that I prefer over an ETF. What’s more, every once in a while, I will go "best in breed" instead of the exchange-traded index fund. Google (GOOG) is that exception.

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.