Owning individual stocks often comes with a heavy price tag of extreme volatility and/or unnecessary downside risk. So we often opt for exchange-traded index funds (ETFs) for low-cost diversification, tax efficiency and superior overall performance.
However, some ETFs have become so narrow in focus. It follows that one may wonder whether or not the expected benefits even exist. One needs to look no further than some of the HealthShares for an introduction to a Colon-Rectal Cancer ETF that tracks the Alpha-Beta-Citi-DMX Colon Rectal Cancer Index. (Okay… yes.. I made that up. But don’t be surprised when it becomes available!)
Nevertheless, there are many lesser known and somewhat narrow segments worthy of your investment dollar. Let’s look at it this way. You could invest in large-company stocks in the S&P 500 ^GSPC (SPDR S&P 500 SPY) for broad market exposure to U.S large caps. If you wanted a piece of large-company stocks in the international marketplace, you might go with established European companies in the iShares S&P Europe 350 Index (IEV).
Yet, what if you wanted a portion of one of the smallest components of broader international economies, like the materials segment. And what if you wanted a reasonable dividend for the risk associated with both international investing and sector investing? Then you might find a home with the WisdomTree International Basic Materials Sector Fund (DBN).
Unlike some investments that hoodwink you into believing that there is diversification around the globe, WisdomTree’s International Basic Materials Sector Fund (DBN) walks the walk. You have both Europe and Asia/Pacific well-represented — from England to Australia to Japan to Germany. And where you want true purity, you are getting 100% materials companies from BHP Billiton to Arcelor Mittal.
In the midst of widespread demand across the globe fro resources, the materials sector has made plenty of sense. And with DBN’s annual dividend yield of approximately 4%, it’s hard to look at bond yields with a genuine sense of enthusiasm.