Exchange-Traded Funds: Your Picks!

Oct 31, 2006 by

After polling the readship of this blog, and people on mturk.com, I received several responses about which exchange-traded funds (ETFs) should be bought. The responses also revealed that some of the readership does not understand the definition of an ETF.

Here are the ETFs you recommended:

EWJ: Because, the interest rates have increased in Japan, and their economy is expected to grow.


ADRD (foreign developed markets) — I picked this foreign developed markets fund over other foreign funds because of the low fee, good diversification, and many undervalued stocks in it’s top 25 holdings

EEM (foreign emerging markets) — this was the only emerging markets ETF available when I purchased it

IWM (Russell 2000) — I bought this for U.S. mid and small cap diversification at a low fee

IVV (S&P 500) — I bought this for U.S. large cap diversification at a low fee

VTI (Wilshire 5000) — This is a small, mid, and large cap stock I purchased in my Roth IRA so I could have wide diversification and an extremely low fee in just one stock purchase. Every little bit of money saved in my Roth can make a huge tax-free profit years down the line.

ILF (Latin American stocks) — both ADRD and EEM didn’t have very many Central and South American stocks when I purchased them, so I added this to round out the diversification

RWR (real estate investment trust) — I knew I wouldn’t be buying a house any time soon, but I still wanted to invest part of my net worth in real estate. I will sell this ETF if/when I buy a house, and use the money to pay down the mortgage.

EWO (Austria) — I no longer own this. I bought this stock before it increased 100% in a year. I picked it because the overwhelming majority of the stocks in it were very undervalued according to a CAPM/DCF calculation.


ILF: Because Latin America is very stable and has lots of unexplored and natural resources as well as a hard work and educated work force.


PBW, because I think alternative energy is a long term good sector, both of because of increasing oil prices and global warming concerns.
PHO, because the water sector is very dependable and as an asset class it performs well in bear markets.


I’m currently invested in 2 ETFs:
1. DVY – Because I strongly believe in dividend investing and in companies that on a regular basis pay and increase dividends.
2. VWO – Because I want to diversify the investment to places other than the USA, and the emerging markets are exactly that.


DVY – I love dividedends and historically they have outperformed no dividend paying companies.

The responses below are not ETFs. Some people suggested investing in stocks, while other suggested investing in closed-end funds. While both ETFs and closed-end funds are exchange-traded, closed-end funds do not disclose their holdings, while ETFs do. When you buy an ETF, you are buying an investment that mirrors an index, or at a minimum, a known group of assets. As a result, you can tell if an ETF is selling at a discount or premium by calculating what its price would be if the underlying assets (shares of stock) contained in it were purchased directly. You can tell if something is not an ETF on a finance website like http://finance.yahoo.com by looking at whether the holdings are disclosed.

These responses were recommendations for corporate stock:

OXGN because cancer cures will get big
TINY because nano research will get big


nintendo stock because I expect them to have a good holiday season


LMT: because the military always need better weapons, as long as we keep being the most powerful army in the world, I feel the military will always be important.

These responses were recommendations for closed-end funds:
FXE: Because I am saving for a European vacation, and I like being able to lock in Euros with my dollars today without paying currency exchange rates.


IFN: India is an enormous country who has an incredible work force and who will have a huge impact on the future.

Readers, please remember that all of this investing advice is coming from an assortment of people. While much of the advice is worth considering, I am by no means endorsing all of these suggestions.

8 Comments

  1. Great post. I’m tracking a few of the ETF’s you list here as well, including…

    EEM and ILF.

    One item that I thought was an ETF, but is not, it is an iShare is KLD. Do you think you can cover iShares in one of your topics?

  2. EEM is both an iShare and an ETF. All iShares are ETFs. iShares are simply a brand of ETF product sold by Barclays Global Investors (see http://en.wikipedia.org/wiki/IShares for details).

    Just as a Kleenex is a branded tissue paper, an iShare is a branded ETF. There are other brands as well, such as streetTRACKS and BLDRS. For a list of every ETF out there (at the moment, only 289), see http://finance.yahoo.com/etf/browser/mkt?c=0&k=4&f=0&o=a&cs=1&ce=289

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