Best And Worst ETFs And Mutual Funds: Consumer Discretionary Sector

Oct. 29, 2012 11:19 AM ETF, HVT, PEZ, PKB, RCD, ROIC, RTH, XLY, VCR, IYC, FXD, XRT, PBS, XHB
David Trainer profile picture
David Trainer

The Consumer Discretionary sector ranks seventh out of the ten sectors as detailed in my Sector Rankings for ETFs and Mutual Funds. It gets my Neutral rating, which is based on aggregation of ratings of 17 ETFs and 27 mutual funds in the Consumer Discretionary sector as of October 10, 2012. Prior reports on the best and worst ETFs and mutual funds in every sector and style are here.

Figure 1 ranks from best to worst the nine Consumer Discretionary ETFs that meet our liquidity standards and Figure 2 shows the five best and worst-rated Consumer Discretionary mutual funds. Not all Consumer Discretionary sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 25 to 372), which creates drastically different investment implications and ratings. The best ETFs and mutual funds allocate more value to Attractive-or-better-rated stocks than the worst ETFs and mutual funds, which allocate too much value to Neutral-or-worse-rated stocks.

To identify the best and avoid the worst ETFs and mutual funds within the Consumer Discretionary sector, investors need a predictive rating based on (1) stocks ratings of the holdings and (2) the all-in expenses of each ETF and mutual fund. Investors need not rely on backward-looking ratings. My fund rating methodology is detailed here.

Investors should not buy any Consumer Discretionary ETFs or mutual funds because none get an Attractive-or-better rating. If you must have exposure to this sector, you should buy a basket of Attractive-or-better rated stocks and avoid paying undeserved fund fees. Active management has a long history of not paying off.

Get my ratings on all ETFs and mutual funds in this sector on my free mutual fund and ETF screener.

Figure 1: ETFs with the Best and Worst Ratings

* Best ETFs exclude ETFs with TNA's less than 100

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We aim to help investor make more intelligent capital allocation decisions. Our research is driven by proven-superior fundamental data, models and equity/credit ratings.

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