Monday, March 05, 2007

Thinking About ETFs

As many readers here are aware, I'm a pretty big fan of ETFs, particularly as a solid foundation for a portfolio. However, I think that you have to drill down into the particular ETFs to consider what their chances of outperformance are.

Obviously, buying ETFs that have constituent companies with a high return on capital (or equity) and a low price (as in a low PE ratio), are likely to return greater capital to your wallet over the long term. That's why I try to drill down into these ETFs before I personally buy them.

One research firm that does this for you is AIR AltaVista Independent Research Inc. Its' methodology was recently highlighted in an interview with AltaVista Research President Mr. Michael Krause, by fellow blogger (here) James Picerno.

One thing that definitely caught my attention was ... statement in the later part of the interview relating to fundamentally-indexed ETFs ...
I am quite a fan of fundamental indexing. We’re getting new flavors and gimmicks in indexing all the time, but I think fundamental indexing is one of the most genuine and promising developments in a long time.

I have blown this horn fairly often in the past ... they appear to simply be a better way to invest. But whether you choose these fundamentally-indexed ETFs, or one of the many ETF allocations which still aren't fundamentally indexed, then researching your choices in relation to price and value measures is almost certain to improve your investing outcomes.


The Confused Capitalist

1 comment:

Anonymous said...

e savings process wether it be tehnology or other types of stocks well thats up to the individual but take advice from financial instituions its well worth some money to spend and ask a financial advisor thats what they know its part of the learning process.