Transports, Medical Devices: Best ETFs for Buying Low?
17 September 2008 at 11:42 am by Gary Gordon
In 2008, a diversified portfolio across asset classes has outperformed stock assets on a relative basis. Nevertheless, you’d be hard-pressed to convince many people that relative performance equates to harmonious sleep.
Double-digit percentage losses are the norm. Only short-sellers and mattress investors have enjoyed the fruits of a busted financial system.
For the moment, forget whether or not equally weighting the asset classes is appropriate for one’s own circumstances; forget whether or not this is the ideal representation… we’re just taking a "sneak peak."
| Large-Cap U.S. Stocks | SPY | -18.60% | |||
| Small-Cap U.S. Stocks | IWM | -9.80% | |||
| Large-Cap Int’l | EFA | -30.50% | |||
| Small-Cap Int’l | SCZ | -32% | |||
| Emerging Markets | VWO | -37.50% | |||
| Commodities | DJP | -7.50% | |||
| International Bonds | BEGBX | -3.50% | |||
| US Bonds (I-Grade) | AGG | 0.08% | |||
| High Yield Bonds | HYG | -15.20% | |||
| REITS | VNQ | -1.90% | |||
| Equal Weight Diversified Portfolio | -15.60% | ||||
And these are approximate year-to-date results through 11:30 Pacific on 9/17/08. They may or may not be more devastating off of the October 9, 2007 high for U.S. stocks.
So where does that leave investors going forward? Should anyone be thinking about buying lower… with the anticipation that we might be closer to the bearish bottom?
Only a crystal ball answers those rhetorical questions. That said, I’ve been impressed enough with the following ETFs for incremental purchasing; that is, you must have some appetite for "buy low" risk.
The iShares Dow Jones Transportation Average Fund (IYT) continues to defy a troubled economy. (Review my column in March regarding the importance of IYT to an economic rebound.)
With oil at $150, the transportation sector did pull back below its long-term trend (200-day average) in July. Yet for most of the year, including the present, IYT has been a winner. (With today’s 9/17/08 "sell-everything" attitude, IYT is up only 7% this year. (A gain… nonetheless!)
Last month, I argued that Warren Buffett’s Berkshire Hathaway (BRK.B) represented the same great apsects of ETFs. (Read "Does Berkshire Represent the Best of Exchange Traded Funds?")
Low cost diversification, tax efficiency, liquidity and transparency are the primary colors of ETFs… and Berkshire accounts for all of these; specifically, BRK.B is a diversified mutual fund-like vehicle (sans expense ratio) where Buffett holds his purchases for many years. You can buy and sell the shares as you see fit. Plus, there are plenty of places to see what Buffett more or less owns, which doesn’t change a heck of a lot.
Finally, Medical Devices (IHI) still remains one of the brightest spots in the health care universe. And for that matter, it reamins one of the brightest bull or bear market ETFs.
Compared to the field,it has suffered a fraction of the downside pain… and most of the upside rewards. IHI, even after the market’s thumping this week, is still only 6% off of its August 52-week highs.
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.
