Oct 25, 2012|
Morningstar's Michael Rawson
Transcript - Not for consumer use. Robot overlords only. Will not be accurate.
On Mondays we often talk about mutual funds today were joined by Michael Ross and from Morningstar were actually going to be talking about. ETS or exchange traded funds good morning Michael. Maybe we should take a moment in just explain our listeners what an exchange traded fund is as compared to a mutual fund Michael if you don't mind. Sure in many respects an exchange traded fund is very similar to a mutual fund our most -- yes. Are issued under in 1940 our investment company act similar to mutual -- -- -- -- legal protection however. In exchange traded fund trades on an exchange intraday where it was as you know the mutual fund trade -- today after the market close that the primary difference. While looking at your first selection today vanguard. Total stock market ETF the symbols -- TI it's down six cents at 7323. What can you tell us about this exchange traded. This exchanges on gives you very broad exported to the entire US markets. Is essentially a pure index fund it goes down by and large -- small in even micro cap stocks. In the beautiful thing about this -- -- -- as the charges only six basis points that's point 06%. Yeah -- you're getting exposure to. Ever every stock out there thank. Exactly so this is a great way to build -- core of your portfolio is -- completely passive type of investor you might just leave this is is the book report. Oil is committed no more active you might still uses -- to build the core part of your book. And then use some more active on 2 march try to get some Al foursome and return on top of this he. Now another exchange traded fund that you highlighted was the powershares S&P. 500 low volatility so this would be spurred the investor investor that's risk averse I was. Yes but it is -- little -- risk -- this has been real popular should immediately be -- -- in real volatile people looking for a way to play the market but still have a little bit less -- in the overall markets. So with this one does. Is it sixty S&P 500. Well below the 500 stocks -- tries to define me 100 stocks among those 500 that have the lowest volatility. You gonna be the end of a little bit less volatility -- he also -- -- having a pretty decent return in a pretty decent dividend yield because you can paint stocks tend to be a little bit lower and also. Yeah I have looking at it and it looks like the yield on it is two point 9% so you're not gonna move on a day like Friday when the stock market was crashing he didn't crash that much and you're still getting your dividend. Right let's take a look at your next one which is ELV is her did I get that wrong with two of the last on. It's ELP it's the -- and -- emerging markets local that. It would just -- visit by his local currency bottom are emerging market countries Eugene exporters to -- -- -- -- -- -- a higher yield from. And invest in a little bit higher response. You're also given the potential currency appreciation that the US dollar continues to decline as it has over the last ten years. This is the kind of strategy that people like Bill Gross have been talking about the worried that the US -- you know it is that the the Federal Reserve is essentially turn on the printed press and that's -- deviate the dollar a long term. But also great that the rate of return unit cares about is really low so is looking for higher yield. In other places such as emerging markets. Two things all note on that particular exchange traded fund year to date it's made about 10%. And the yield on it is 3.3 percent would kind of volatility should somebody expect with that with that ETF. Should definitely expect -- also you can receive also able to probably a little bit to -- just stopped to even notes it's at it -- -- income. On the detect respond to it is everything in multiple witnesses into the -- Depart when people say okay we've could rule on the -- of 60% of -- attendance. And about 40% -- stability talking about seat on so this is definitely a little bit of higher risk played. But -- if you believe as Bill Gross those that we put into this new normal. Where is there's there's these hidden risks and treasury bond perhaps it might be good investments -- -- but what if we ever see a flight to -- the word maybe the Euro dissolved some presents. -- -- We have ten of the recession you treasury bonds would rally -- -- on my business was entry emerging market local -- -- could suffer but I think over the long term. It's good to have some non dollar diversification to your portfolio. Very good -- Michael thank you very much free time we appreciate it. That's Michael Ross and for Morningstar the three picks were the vanguard total market -- TI. The S&P low volatility SP -- And then the wisdom tree emerging markets the symbol for that fund was ELD again those are all exchange traded funds which are slightly different. From mutual funds putting them out there. -- -- -- for today to our password to get ready right down Locke -- it's now L old CKE dash OV ER -- and when you hear the gas pump bell make sure your. Caller number fifteen on our contest hotline that number of course. 8088205. 2263. Can text any questions that you might have to us. Our text number 68680. My email address some Bakken and must confess I was remiss I did not answer emails while I was gone but if you have a question. They would like to ask of me. My email address my personal email address is barrier Armstrong at wrko.com. That's very Armstrong at wrko.com. And I'll be certain to respond to your emails. Very quickly -- talked about forming housing strategist at Morgan Stanley he's going into a new business you wanna hear about that. 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