4 Six-Month-Old ETFs That Will Survive and Thrive
Whether it is $50 million or $100 million in assets under management (AUM) or average daily volume of 100,000 shares or 250,000 shares, some folks obsess over numbers when it comes to ETFs. Oddly enough, rarely is performance one of the numbers most obsessed over, but that is a story for another day.
Some ETF industry observers have taken to saying some ETFs that are six-months-old or less will not be around in a couple of years because these ETFs have not yet attracted sufficient assets. Long-term investors should avoid these products, says one industry observer.
Said another way, the argument that an ETF needs a particular amount in assets to be considered "good" or "successful" has moved from absurd to asinine when it is implied that six months is the cut-off point for a fund's probability of survival.
There are plenty of ETFs that debuted in March (or more recently) that will be around next year, two years from now and even longer. Here are some ideas and in the essence of being noble, the $2.5 billion PIMCO Total Return ETF (NYSE: BOND) will not be included on this list.
WisdomTree Emerging Markets Corporate Bond (NASDAQ: EMCB) The WisdomTree Emerging Markets Corporate Bond ETF debuted in early March and now boasts an AUM total approaching $63 million. That is impressive under any circumstances, but in the case of EMCB, the ETF's ascent to credibility is quite a feat. The reason being some naysayers would argue that the concept of emerging markets corporate debt within an ETF is too esoteric for the tastes of most investors.
Cleary, EMCB has proven that theory wrong. If nothing else, investors are embracing a 30-day SEC yield of 4.21 percent. Yes, EMCB will be around for a while.
Market Vectors Preferred Securities ex Financials ETF (NYSE: PFXF) PFXF is just five weeks old and Market Vectors does not yet have AUM data for the ETF up on its Web site. However, there are signs this ETF will be not be a survivor, but one that thrives as well.
Average daily volume for PFXF is just under 116,000 shares per day and even that drops off, PFXF has some weapons at its disposal. With an expense ratio of 0.4 percent, it is the cheapest ETF tracking preferred stocks. It is the only preferred ETF that does not devote an excessive amount of its weight to bank stocks and it features a 30-day SEC yield of 6.28 percent.
Market Vectors Morningstar Wide Moat Research ETF (NYSE: MOAT) MOAT is another ETF where critics can say the premise is too obscure and the focus too laser-like. That has not stopped investors from pouring almost $38 million into the fund since its April debut. MOAT focuses on companies with significant competitive advantages, not exactly a concept that will escape most investors.
Since it is often familiar companies that have the biggest competitive advantages, MOAT will not chase potential investors away with obscure holdings. For example, Google (NASDAQ: GOOG) and Oracle (NASDAQ: ORCL) combine for over 11 percent of MOAT's weight. MOAT has surged 9.4 percent in the past 90 days.
iShares Morningstar Multi-Asset Income Index Fund (BATS: IYLD) Here's what the naysayers will say about the viability of the iShares Morningstar Multi-Asset Income Index Fund: "Yeah, IYLD will be around forever because iShares rarely closes ETFs." That might be true, but what is certain fact is that IYLD has attracted over $55 million in AUM since its early April debut.
IYLD is a fund of funds whose roster is comprised of other iShares ETFs giving investors exposure to domestic and foreign equities and bonds. A 30-day SEC yield of almost 5.3 percent cements IYLD's status as an ETF that will be around for a while.
For more on important ETF benchmarks, click here.
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