Brendan Wagner's  Instablog

Brendan Wagner
Send Message
Brendan Wagner is a portfolio manager at Spectrum Advisory Services in Atlanta. In addition to managing portfolios for private individuals, families and corporations, Spectrum is the advisor for the Marathon Value Portfolio (MVPFX) mutual fund. After graduating with a finance degree from Boston... More
My company:
Spectrum Advisory Services
My blog:
alphaninja.blogspot....
  • Be careful when choosing your ETF  0 comments
    Jul 16, 2009 1:43 PM | about stocks: XRT, RTH

    Sector ETF's are a great tool for investors to narrow their approach. The options are vast, and the management fees are very cheap. You can gain exposure to a particular sector that you know a lot about, or you think is out of favor and due to outperform the general market.
     

    It's important to dig into the holdings before investing in these, because there are major differences among them. For an example, here are two retail ETF's - symbols XRT and RTH. The XRT, run by State Street Global Advisors, has beaten the Merill Lynch-run RTH by about 10% over the past year, and at times the performance disparity has been huge.

    A look at the holdings explains why. Though they're both "retail" funds, the holdings are vastly different:
     

    In the RTH, Walmart and Home Depot account for 34% of the entire index. Whether that's bad for diversification (I think it is) is beside the point. In the XRT, Walmart's weight is 1.58% and Home Depot is not even in the fund!

    These are great vehicles if you use them properly, but the holdings in them can be very different even though the names of the funds are nearly identical. Choose wisely...

    Stocks: XRT, RTH
Back To Brendan Wagner's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.