ETF Update: New Index Family, Health Care Set To Boom

Includes: IYH, VHT
by: Tom Lydon

New Index Family

There is a new index family that combines long and short futures and cash is available for ETFs to follow. Morningstar has created a group of five commodity-futures indexes that are designed for investors in search of benchmarks.

The Morningstar Commodity Indexes come in Long/Short, Long/Flat, Short/Flat, Long-only and Short-only. Morningstar figures out a "linked" price for each commodity by using price changes and the loss or gain resulting from replacing a contract with one that matures in the future, reports Darla Mercado for Investment News.

So stay tuned: The launch of new indexes indicates new ETFs likely are on the way.

Health Care ETFs Set To Boom

Health care ETFs seem to be the investment topic of the day. Last year, the oldest of the baby boomers turned 60, the first of the next 80 million! The U.S. health-care industry stands to profit from boomers, and ETF sponsors are well aware. Around a dozen firms have come forward with about 40 health care-related ETFs, reports Zoe Van Schyndel for The Motley Fool.

Most health-related ETFs share a common characteristic: Their holdings are weighted by market capitalization. That means the larger, more well-known companies will dominate in a majority of funds.

HealthShares breaks the mold by equally weighting the holdings so that no one company dominates. PowerShares also takes its own path with fundamentally-weighted funds, picking stocks based upon sales, cash flow, book value and dividends.

Health care ETFs can be broad or narrowly focused. Two broad based ETFs with a track record include Vanguard Health Care ETF (NYSEARCA:VHT), up 7.3% year-to-date and iShares Dow Jones U.S. Healthcare Sector Index Fund (NYSEARCA:IYH), up 6.9%.