3 Risky ETF Areas To Avoid

23 March 2010 at 10:52 am by Gary Gordon

Not every investment will make you money. And even those that do… they may not have been worthy of the ETF risks you are taking.

Here are 3 areas that I continue to avoid:

1. Solar Energy. It’s just not happening for the “sun.” Neither Claymore Global Solar (TAN) nor Market Vectors Global Solar (KWT) have managed to climb above 200-Day moving averages, even though 95% of world stock indexes have done so. What’s more, according to RiskGrades.com, “solar” is 2x as volatile as the S&P Global 100 Index.

In the near-term, one can visualize (see chart) that global stocks in the iShares Global S&P 100 Index Fund (IOO) corrected in Jan/early Feb, and have since been recovering. In contrast, Global Solar (TAN) has corrected with far more intensity and has yet to show definitive signs of wanting to push higher.

2. Agricultural Commodities. Granted, many investors have successfully profited from activity in soy, corn, sugar and wheat. Yet the seemingly inevitable trend of dollar devaluation has been on hiatus since November; indeed, the surprising turnaround for the buck has hampered commodity bulls.

At the present moment, the PowerShares DB Agriculture Fund (DBA) is well below its 200-Day trendline. In contrast, broad-based commodity index funds like GreenHaven Continuous Commodity Index Fund (GCC) remain in an uptrend, thanks to enough demand for base metals, precious metals, oil and gas. What’s more, the diversification across all commodities reduces the risk of having gone “all in” on “ag.”

3. Vietnam. There are times as investors where we may look upon an investment as an exotic bird. Unfortunately, the bird known as Market Vectors Vietnam (VNM) presents more red ‘Renko” boxes than white… and that’s a bad thing!

If you think that you need more Asia in your “need-to-have-China-trading-partners” approach, I’m all for that. The better way to go, however, might be with the iShares S&P Asia Fund (AIA) or the iShares All Asia excl Japan Fund (AAXJ). The former fund, AIA, does not have China in the index, whereas the latter (AAXJ) includes China.

You can listen to the ETF Expert Radio Show “LIVE”, via podcast or on your iPod. You can review more ETF Expert features here.

Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company and/or its clients may hold positions in the ETFs, mutual funds and/or index funds mentioned above. The company does not receive compensation from any of the fund providers covered in this feature. Moreover, the commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.

Share this post: