Value Line Any Way You Like It - PowerShares ValueLine ETF Versus the First Trust Value Line 100 Closed-End Fund (FVL, PIV)

Includes: FVL, SPHQ

Herb Morgan (Efficient Market Advisors, LLC) submits: Today marks the one month anniversary of trading for the Powershares ValueLine 100 Index Fund (PIV). It’s rare that I am enticed by the siren wale of the fund industry’s product machination machine but even the strictest dieters fall to temptation once in a while. (I bought a few shares recently.) I see several issues worth exploring before deciding to aggressively purchase this new ETF.

  1. The Value Line index will be more dynamic than the more traditional indices used to model ETFs. Does a capital gain issue exist?
  2. Value Line has a great record of selling research to individual investors and retail stockbrokers but a rather poor record of managing money. It is also unproven that this new Best of Breed top fifty picks of the Value Line list will enhance investor returns.
  3. There is a closed end fund alternative to PIV in FVL that trades at a substantial discount to its Net Asset Value with a poor track record.
  4. Cost......Is always and everywhere an issue in this business.

Exchange Traded Funds treat index changes differently than one might assume. ETF’s actually exchange shares of the stock being removed from the index for shares of the stock being added to the index in a tax free exchange. The question I have pondered without finding a definitive answer is, “At what price is the tax free exchange achieved?