danno

Comparing Green Energy ETFs

OOPS.

What I meant to say is that a good Index should NEVER have lousy companies unless...

Sorry about that.

On Oct 19 09:00 AM danno wrote:

> Actually, a good Index should have lousy companies in them, unless
> it is a sector or composite Index. When companies go bad, they are
> replaced. DJ 30 Industrials is a good example. Moreover, some of
> the better ETFs really offer is intelligent indexing that is most
> of the benefits of a mutual fund through and active selection process,
> but then passive index management to avoid market timing, capital
> gains distributions, and high fees. Since very fund managers (and
> only a tiny percentage of individual of investors) can beat the market
> with any regularity on a risk-adjusted basis (especially when you
> adjust for fees) it's very questionable, in my mind, that actively
> managed funds or individual investors are going to beat the indexes.
>
>
> What smart investors can do, is:
> a) Asset allocation and diversification
> b) Pick the very best index-based funds.
> c) only invest their "play money" in individual stocks, short-term
> investing, and other speculative stuff.
>
> This is not fun to hear, very humbling, and doesn't sell books and
> TV shows, but it does allow investors to get good returns, and get
> on and enjoy the rest of their lives.
>
> The one exception is when investors really know an industry or company
> very, very well. Then sometimes, they can beat the street, but that
> means a lot of work and specialized knowledge since there are often
> many insiders and street analysts who follow the same companies very
> closely and get paid to do it (so they spend many, many hours following
> the company, its peers, and meeting with management. That's a tough
> edge to beat. It doesn't always mean their advice is great since
> they often cannot publish what they really think.

Comparing Green Energy ETFs

Actually, a good Index should have lousy companies in them, unless it is a sector or composite Index. When companies go bad, they are replaced. DJ 30 Industrials is a good example. Moreover, some of the better ETFs really offer is intelligent indexing that is most of the benefits of a mutual fund through and active selection process, but then passive index management to avoid market timing, capital gains distributions, and high fees. Since very fund managers (and only a tiny percentage of individual of investors) can beat the market with any regularity on a risk-adjusted basis (especially when you adjust for fees) it's very questionable, in my mind, that actively managed funds or individual investors are going to beat the indexes.

What smart investors can do, is:
a) Asset allocation and diversification
b) Pick the very best index-based funds.
c) only invest their "play money" in individual stocks, short-term investing, and other speculative stuff.

This is not fun to hear, very humbling, and doesn't sell books and TV shows, but it does allow investors to get good returns, and get on and enjoy the rest of their lives.

The one exception is when investors really know an industry or company very, very well. Then sometimes, they can beat the street, but that means a lot of work and specialized knowledge since there are often many insiders and street analysts who follow the same companies very closely and get paid to do it (so they spend many, many hours following the company, its peers, and meeting with management. That's a tough edge to beat. It doesn't always mean their advice is great since they often cannot publish what they really think.

Comparing Green Energy ETFs

Dear Dr. Konrad:

If you look at the history of the holdings of some of these ETFs you'll realize that many of them have managers that don't know squat. Of course the managers are learning, but investors are paying them to learn at their own expense.

I don't know why you waste your ink on stuff like the cleanedge ETF, PBW, or PBD or many of their peers including the water funds. The strategy behind so many of these indexes looks like something my assembled by a kindergarten class. The funds grab deep in shallow industry niches and pick up a lot of crappy companies. Ever see a good publicly-traded fuel cell company? Funny, I haven't either. What exactly does this "index" track, anyhow?

Sometimes the indexes/ETFs pick companies that are anything but green (corn ethanol, "clean" coal, polluting coal plants anyone?), or companies that have tiny or exposure to the sector, demonstrates that they are either run by the incompetent for the incompetent/lazy investor or they are products just out to earn a quick buck. Obviously it's both of the above.

Did anyone out there ever notice that some of these indexes/ETFs have 6%, 10%, 15% or even 20% of their holdings in one stock? The arbs and hedge funds sure have. Ever see what happens when an index owns 100-270 days average trading volume of one stock when the quarterly/semiannual/a... rebalance happens? The arbs get several days to take the ETF investors to the cleaners. Maybe that's the cleanest thing about some of these funds.

Or the indexes hold stocks that are either super illiquid or trade on some exchange that's closed to foreigners investors (like us Gai-jin) so that the ETF can't actually track the index properly.

If you want narrow focus on green/clean energy pick up a solar or wind ETF for the short-term directional volatility. For the long run, investors and writers should do their home work and look at more than just fees.

Who's running these things ? Mickey, Goofy, or Pluto? People work really hard to save their money - so they should work just as hard to do their homework before then invest it. IMHO, I would recommend that you do much more extensive research before further pontification in this investment arena where quality products are few and far between.