Accessing Commodities And India Via ETFs; 'Favorite' ETFs For 2006 (CEFs: IFN, IIF; ETF: DBC, PHO; AU)

Includes: AU, DBC, IFN, IIF, PHO
by: Roger Nusbaum

Roger Nusbaum submits: From a Mr. Richard Feder in Fort Lee, NJ:

Roger, I'm looking for a few ETFs. I want one to be an ETF that invests in companies that produce Copper, Platinum and other metals and may track a Commodities spot index, and I want an ETF that will invest in India. Also, what are your favorite ETFs for 2006?

Deutsche Bank is supposed to be bringing an ETF that is linked to a commodity index that is expected to trade under symbol DBC. I'm not sure when it will price [more on DBC here]. For folks that do business at Merrill Lynch, they can access the Rogers International Commodity Index Fund. That one trades on the CME and for some reason does not seem to be available at other firms.

PowerShares will have an ETF for India soon. The last I read about it, probably at ETFInvestor (article here), it was only going to have 17 components. There are two closed end funds for India (IFN, IIF). I own one of the two for some clients. The 17 thing is a bit of a concern to me.

Judging by the last question, I would guess the person might be a new reader of this site. I don't really have a favorite anything, where portfolios are concerned. I write a lot about themes that make the most sense to me and I overweight the best way I can.

The other thing is that I don't use too many ETFs for clients. Where possible I use common stocks. Sometimes an ETF is the best possible tool. I was quoted in the year-end issue of BusinessWeek talking about the iShares Austria, which is a personal holding and held for some clients. Austria, as a way to capture some of the benefit of Eastern Europe is something that I have been writing about here for almost a year. The theme is still intact, I think, but I don't know if it is my favorite.

I think I disclosed on this site that I bought the water ETF (PHO) across the board and personally during its first week. That might be a favorite. I have an article about another ETF coming Tuesday on that I've never mentioned before. That could be become a favorite I suppose.

In truth the use of the word 'favorite', or something similar, assigns an emotion to the idea. I try to leave emotion out of the process entirely. Something will be the best performer in client accounts and something will be the worst. It will either shake out as I expect or it won't.

As an example of this, many of my clients own Anglo Gold (AU) for their gold exposure -- I have disclosed this many times. For 2005 the stock was up 40%. That makes it one of the best performers for clients. I did not have any notion that it would do so well (obviously it did well because of the move in gold and not because of my stock picking).

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