ETF Update: Target-Date ETFs For Retirement Plans, Shopping For Retail ETFs, New Commodities ETN, Tax Disagreement

Target-Date ETFs For Retirement Plans

XShares, perhaps best-known for its line of HealthShares ETFs, is now broadening its horizons even further. According to Jesse Emspak at Investor's Business Daily, the fund provider has joined forces with RPG Consultants to get target-date ETFs into retirement plans.

Back in October, XShares launched the TDAX Independence ETFs. They're a series of target-date funds, which start out as mostly equity funds and a little bit of fixed income. As the fund nears its "target date," the fixed-income portion grows while the equity price shrinks.

ETFs aren't a big part of the 401(k) market yet, but RPG and XShares hope that as investors realize how much more cost-effective target date funds are relative to mutual funds, their intereste will be piqued. And if the TDAX funds manage to capture just 1% of the 401(k) market, it's no small potatoes: the amount will translate into billions of dollars.

Shopping For Retail ETFs

Did you know that while you are holiday shopping, you could earn some money back by investing in one of the retail ETFs? Zoe Van Schyndel for The Motley Fool says the number of consumer funds can be confusing, and the types of companies they invest in differ greatly. Whether it's consumer discretionary or consumer staples, goods and services, local or foreign, the choices go on and on.

These sector ETFs are more volatile than the broader market funds, and tend to have higher expense ratios, so consider these expenses before buying. Consumers might be a bit squeezed this holiday by a real estate downturn, high oil prices and a weaker dollar. Make sure to look at the holdings and research where your money is going. With an economic downturn the consumer staples might be more attractive. And don't forget to have fun while shopping.

• iShares Dow Jones US Consumer Services Sector (IYC)
• iShares Dow Jones US Consumer Goods Sector (IYK)
• Vanguard Consumer Discretionary (VCR)
• Vanguard Consumer Staples (VDC)
• Consumer Discretionary Select Sector SPDR (XLY)
• Consumer Staples Select Sector SPDR (XLP)

New Commodities ETN

A new ETN helps investors cast a wide net when investing in commodities. Many financial advisors recommend a slice of your portfolio be invested in commodities. This may be the one-stop, all-around fund to help. Elements Rogers International Commodity Total Return Index (RJI) tracks an index that includes gold and heating oil to greasy wool, azuki beans and rice, reports Eleanore Laise for The Wall Street Journal.

The index consists of 36 commodities, and is far more diversified than any other popular commodities indexes tracked by popular funds. Matt Hougan, of Index Universe, says it will offer investors a smoother ride.

Tax Disagreement

A disagreement between ETN sponsors and the mutual fund industry, represented by the Investment Company Institute, is heating up. The dispute regards the tax treatment of the two types of funds, with ICI claiming that ETNs are given an unfair advantage. ETNs are taxed when a share is sold, just as single stocks and ETFs. ICI wants ETNs to report accrued income the same way mutual funds do, reports Jesse Emspak for Investor's Business Daily.

A typical open-ended mutual fund is required to payout dividends to shareholders which are taxed at the ordinary income tax rate instead of the preferred long-term capital gains rate. ETN shareholders pay taxes on the income as it comes in from the securities that make up the ETN.

The Securities Industry and Financial Markets Association [SIFMA] believes ETNs should keep their tax treatment because an ETN is more like a futures contract. ETNs are debt instruments and the investor assumes the risk that the provider could default.