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Joseph P. Porter

 
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  • Ignore ETF Expense Ratios? Maybe [View article]
    In general, a larger fund has less chance of closing, I would suppose. But keep in mind that if two funds use the same basic index - or at least invest in the same companies - it wouldn't necessarily matter which one was "bigger."

    Size doesn't always matter, but it may be an indicator of past success and confidence in the underlying index and fund management.

    I would imagine that some of the expenses are fixed, but not all of them. Salaries, for instance, may be variable (in particular).

    Thanks for the comments!
    jpp
    Dec 19, 2014. 12:20 PM | 1 Like Like |Link to Comment
  • Ignore ETF Expense Ratios? Maybe [View article]
    This may actually be where expense ratios got their beginning - at the beginning, when a fund doesn't have any real income to measure expenses against, it's only available measure would be the net assets it brings to the table.

    The expenses themselves are fairly easy to project - the fund managers are a known commodity; the administrative staff already exists - as do the facilities; especially when dealing with major fund providers, every cost is well understood, if not exactly known.

    But telling people up front that a $5-billion fund will cost $50 million to run might make people a little leery. So they come up with a number that fits - and the only one that looks plausible would be the AUM and the projected expenses, hidden nicely in an obscure figure.

    That may be a little cynical, but there you have it. After the first year, however, a more realistic measure should be expected.

    Thanks for writing!
    jpp
    Dec 18, 2014. 02:33 PM | 1 Like Like |Link to Comment
  • Ignore ETF Expense Ratios? Maybe [View article]
    willydo -

    Glad you found the article informative.

    It has been a rough couple of months for everyone, really. Of my ETFs PCEF was not the only one that had negative performance (MDIV did, as well) but it was the only one that was negative for total return. I realize that high-yield funds are not going to perform overly well, but the expectation is that their lack of performance should be compensated for by yields that are adequate to keep the total return at least nominally positive. If they can't do that, it's time for something else.

    I replaced PCEF with the higher-yielding REM. I have no expectations that it will perform great, but its 12%+ yield should make it fare better than PCEF.

    Thanks for writing! Have a nice holiday season!
    jpp
    Dec 18, 2014. 12:14 PM | 1 Like Like |Link to Comment
  • Guggenheim's RSP: Equal Weight Or Dead Weight? [View article]
    My next article is going to articulate my position on expense ratios and why some people may overplay their importance.

    Thanks for the comment!
    jpp
    Dec 8, 2014. 02:47 PM | Likes Like |Link to Comment
  • REM And MORT: Mortgage REIT ETFs For Growth And Yield [View article]
    RAKJ-

    My pleasure - I'm glad you found useful information. Best of investing to you!
    jpp
    Dec 8, 2014. 11:55 AM | Likes Like |Link to Comment
  • Guggenheim's RSP: Equal Weight Or Dead Weight? [View article]
    galicianova -

    VO an IWR are fine ETFs, and they seem to have performed extremely well. But the idea in my article was not to seek some number of companies covered by the fund(s), but comparing funds that covered the same basic index (other than the weighting). There are funds out there that have performed better than RSP (or VOO, or IVV, for that matter), but the article was aimed at examining the differences between funds that covered all and only the S&P 500.

    That's a very modest goal, and I believe I accomplished what I set out to do. When investing in an ETF that covers the S&P 500, it is better to buy into a fund that is equal-weighted rather than cap-weighted.

    I am considering an article explaining my take on expense ratio and why I think it is overrated as a factor in evaluating ETFs.
    Dec 6, 2014. 11:48 AM | Likes Like |Link to Comment
  • PIC: Potential Investment Criteria [View instapost]
    My pleasure.
    jpp
    Dec 4, 2014. 12:20 PM | Likes Like |Link to Comment
  • REM And MORT: Mortgage REIT ETFs For Growth And Yield [View article]
    MORL is an ETN, and I'm a little leery of ETNs in general. It is also a leveraged fund, and I'm very leery of leveraged funds in general. So ... guess what? I am very, very leery of MORL.

    The fund offers a monthly payout of 2X the return of its holdings. Over the past year, it has averaged $0.40/month dividend (ranging from 6 cents to $1.01). Its yield is currently around 18 - 19%. Very nice.

    The key to playing MORL is to realize that it "resets" every month, so making out good one month is not an indication of what's waiting for you next month. A bad month in REITs would be amplified significantly in MORL (and likewise, a good month).

    A leveraged multiplier fund is okay if you're sure the industry covered by the fund is going to do well, but very risky if there is any uncertainty. I would not play MORL, but it's your money.
    Dec 3, 2014. 04:05 PM | Likes Like |Link to Comment
  • Guggenheim's RSP: Equal Weight Or Dead Weight? [View article]
    Did a manual comparison of their holdings. One by one. In excel. I trust nothing but my own prodigious skill.

    Exactly 206 overlaps. If you want the list, email me and I will send the list to you.

    jpp
    Nov 28, 2014. 11:38 AM | 1 Like Like |Link to Comment
  • Guggenheim's RSP: Equal Weight Or Dead Weight? [View article]
    You might need to check again. VO and RSP overlap on at least 206 companies.
    Nov 27, 2014. 09:00 PM | Likes Like |Link to Comment
  • Guggenheim's RSP: Equal Weight Or Dead Weight? [View article]
    Indexor

    Did not take umbrage, although as you note, a few people introduced discussions of other matters that were somewhat afield of what I try to do in the article. But that's okay as it gives me some ideas for other articles.

    I tend to draw my terminological lines fairly tightly. Contrarians are motivated by certain factors, while the manager of an equal-weighted fund is motivated by other (different) factors. Their behaviors might overlap in some respects, but I sort of back away from calling the equal-weight manager "contrarian" the way I would back away from calling the contrarian an "equal-weight" advocate.

    (In fact, it had never really occurred to me to think of equal-weight fund management as contrarian investing, even though rebalancing the portfolio involves buying low and selling high. I look at the motivation for the activity, rather than the activity itself.)

    I would probably prefer to think of RSP as a "pure S&P 500 play," rather than as a mid-cap play, and as distinct from a cap-weighted play. I do not expect that such an approach would work for just any list of companies - just one that involves some qualitative selection criteria that sets its listing apart from the crowd.

    Thanks for elaborating on your comments - I appreciate it very much. Enjoy your Thanksgiving, and best of luck to you!
    jpp
    Nov 27, 2014. 01:24 PM | Likes Like |Link to Comment
  • Guggenheim's RSP: Equal Weight Or Dead Weight? [View article]
    A little controversy is to be expected when an article compares popular stocks and ends up picking a winner - especially when one of the losers is a Vanguard product. Or something as venerable as SPY.

    Controversy is good for the circulation. Blood flow, that is. And that helps digest food better. I got a duck, sweet potatoes and pumpkin pie to eat, so I'll need all the help I can get.

    Have a nice Thanksgiving, Hardog! And everyone else, too!
    jpp
    Nov 27, 2014. 12:33 PM | Likes Like |Link to Comment
  • Guggenheim's RSP: Equal Weight Or Dead Weight? [View article]
    I consider only the share price, although the dividend yields here are not so great that they would radically change things. Also, given how long SPY has been around, it might artificially close the gap between its performance and that of RSP, making the two seem more comparable in terms of performance than they actually are.

    My goal was to establish a basis for an investor to look at how the funds compared if they were to buy today. They can anticipate what the total return might be, but I was more concerned that an accurate picture of performance was presented.

    As for the "contrarian" spin one might want to pin on equal weighting, one can use terms as strictly or as loosely as one is inclined, but when used too loosely (or strictly) the term begins to lose its meaning.

    Note that there are funds that are based on momentum (PowerShares has several) that are not necessarily "cap-weighted." There is also contrarian investing (I do not know of any "contrarian" ETFs, however) that is not based on "equal weighting."

    If I am operating an equal-weighted fund, and X becomes over-weighted while Y becomes under-weighted, I sell shares of X and buy shares of Y, but I do so only to the extent that it is necessary to maintain equal weighting; my commitment is to the equal distribution of assets among holdings.

    If I am a contrarian, I am motivated to sell X because people are buying X, and I buy Y because people are selling Y, but I do not have a gauge of "equal weighting" that governs my activity - my activity is gauged by market trends.

    Ultimately, issues as to whether an equal-weighted fund is contrarian or a cap-weighted fund is based on momentum becomes something of a semantic quibble. If the issue becomes that, all four terms are ultimately meaningless.

    Thanks for the thought puzzle.
    jpp
    jpp
    Nov 26, 2014. 10:49 PM | Likes Like |Link to Comment
  • Guggenheim's RSP: Equal Weight Or Dead Weight? [View article]
    I do not mention VO or IWR. They are not, strictly speaking, comparable ETFs. My aim was to compare equal weighting with cap weighting in strictly comparable funds; I discuss VOO, IVV and SPY, all of which have the same holdings as RSP.

    Next, your point about when equal-weighted funds buy and sell is not germane to the issue, and may not even be correct. RSP rebalances quarterly and reconstitutes annually - not when market is up or down. Please cite your sources for your claim so that I may evaluate them.

    As for RPG and RPV, they are very nice funds, but - again - they are not strictly comparable to RSP in terms of holdings, and do not pertain to the issue I was examining here.

    jpp
    Nov 26, 2014. 06:35 PM | Likes Like |Link to Comment
  • Guggenheim's RSP: Equal Weight Or Dead Weight? [View article]
    Nicholas -

    Glad to provide some information. I walked away from this article (along with my sector-specific articles) with a real appreciation for the Guggenhiem family of funds. I will definitely be following them more closely.

    Best of luck to you
    jpp
    Nov 26, 2014. 02:59 PM | Likes Like |Link to Comment
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