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Catch These Poland ETFs On The Upswing

Poland’s currency zloty, bonds and stocks gained on Monday (May 16, 2016) as Moody’s reaffirmed its long-term credit rating for the country at A2. And unsurprisingly two ETFs tracking the country – the iShares MSCI Poland Capped ETF (NYSEARCA: EPOL ) and the VanEck Vectors Poland ETF (NYSEARCA: PLND ) – jumped 3.4% and 3%, respectively. Poland, one of the outperformers in the EU, has been lagging in recent months thanks to growth slowdown in the emerging markets. Eurozone troubles also continue to weigh on the country. Still, as per IMF forecasts, the country’s GDP growth rate is expected to touch 4% in 2016 as compared to 3.6% in 2015 building investors’ confidence in the country. Headwinds Remain Although Poland did not get a downgrade from Moody’s, the rating agency revised its outlook for the country to negative from stable. The agency cited several reasons for the change in outlook including fiscal risks arising from a substantial increase in current expenditures, uncertainty as to offsetting revenue measures and the government’s intention to lower the retirement age. Another factor affecting the outlook was the risk of deterioration in the investment climate thanks to unpredictable policies and legislations. The President’s office has recently presented a proposal to implement a law converting Swiss franc mortgages into zlotys. The International Monetary Fund (IMF) has criticized this proposal and stated that the country’s financial system along with credit and economic growth will stand to suffer if the country goes ahead with its plan to convert foreign-currency denominated mortgages. The IMF has also warned that the increase in government expenditure would lead to a rise in budget deficit to 2.8% in 2016. The rising budget deficit could even cross 3% in 2017, breaching the European Union’s budgetary rules. Instead, the IMF has encouraged the Polish government to follow policies that are market friendly. Despite these concerns, investors who believe that Poland is poised for a turnaround could catch the Poland-focused ETFs. Both the ETFs carry a favorable Zacks ETF Rank of 3 or ‘Hold’ rating, suggesting room for upside. EPOL in Focus EPOL has about $173.4 million in AUM and an average daily volume of 274,000 shares. The product tracks the MSCI Poland IMI 25/50, charging 63 basis points a year from investors. With 40 stocks in its basket, this fund puts as much as 46.1% of its total assets in the top five holdings, suggesting high concentration risk. Financials actually makes up roughly half of the portfolio with 44.7% exposure. Energy and materials round off the top three sectors with exposure of 17.3% and 9.6% respectively. Shares of EPOL fell roughly 5.4% in the last one-month period ended May 16, 2016. PLND in Focus The fund looks to track the VanEck Vectors Poland Index and has 26 securities in its basket, charging investors 60 basis points a year in fees. The fund has 36.4% of its total assets in the top five holdings. PLND also puts heavy focus on financials, with as much as 37.1% exposure, followed by a 14.1% allocation to energy, 12.7% coverage in utilities and 11.4% in consumer discretionary. PLND sees a paltry volume of around 13,000 daily, while the ETF lost more than 5.8% in the last 30 days. Original Post

What’s Driving The Global ETF Industry?

Amid continued volatility in the oil price and the instability in the stock markets, assets invested under global ETFs/ETPs touched an all-time high of $3.138 trillion in April. While equities failed to impress the ETF space, fixed income led the way. As per data from ETFGI’s April 2016 global ETF and ETP industry insights report , the Global ETF/ETP industry had a whopping 6,297 ETFs/ETPs from 283 providers on 65 exchanges at the end of April 2016. As per the report, inflows were witnessed across the globe with record levels of assets being gathered in the U.S. ($2.217 trillion), Canada ($77.42 billion), Europe ($533.34 billion), Japan ($145.93 billion) and other countries in the Asia-Pacific region ($125.21 billion) (read: Will European ETFs Continue to Underperform SPY? ). In April, global ETFs/ETPs witnessed net inflows of $10.13 billion, led by fixed income ETFs/ETPs which gathered the largest net inflows with $7.73 billion. This is not surprising considering the upcoming U.S. election, Brexit vote and the impact of quantitative easing across the globe which have ruffled investors. Below we have discussed a couple of areas which saw the highest inflow last month. Bond ETFs Record flows in bond ETFs could be attributed to the low-yield environment in most developed markets across the world. Disappointing macroeconomic data, global market turbulence and threats to the stability of the U.S. economy have been making headlines since the beginning of the year, leading to volatility across all asset classes. Because of these factors, bond ETFs have lately gained a lot of popularity as investors continue to look for attractive and stable yield in this ultralow rate interest environment (read: Time for Investment Grade Corporate Bond ETFs? ). In fact, these uncertainties led the central bank to lower the number of hikes and the projected federal funds rate this year. It now expects the federal funds rate to rise to 0.875% by the end of the year, instead of the previously expected 1.375%, implying only two rate hikes as compared to the four projected in December. The double blessing of easy monetary policy globally and a delayed rate hike in the U.S. made fixed-income securities a winner in the month, as investors scurried to safer assets. Funds which saw maximum inflows were the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEARCA: LQD ) – $1.2 billion, the Vanguard Total Bond Market ETF (NYSEARCA: BND ) – $ 834.3 billion and the iShares Core Total U.S. Bond Market ETF (NYSEARCA: AGG ) – $829.6 million. Minimum Volatility ETFs With mixed data flowing in from various quarters and widespread fear among investors about the direction of the market, it’s not surprising that investors are looking to follow a proper trading strategy which ensures stability. With that in mind investors sought low volatility ETFs with funds like the iShares MSCI USA Minimum Volatility ETF (NYSEARCA: USMV ) and the iShares MSCI EAFE Minimum Volatility ETF (NYSEARCA: EFAV ) witnessing inflows of $1.2 billion and $601.2 million, respectively. Link to the original post on Zacks.com

The Story Of A Diversification Graph

How do you decide what stock or which sector to invest in? You rely on the media? You just invest in the latest hot stock? Or you setup a process to strategically help you out? When all is good, it seems easy to buy a stock but when the markets turn sour, it becomes more challenging and emotions start to make their way in. For example, did you ever sell a stock because you weren’t happy with the customer service you got? That would be an emotional transaction. Finding the Story… There are a number of ways to look at the graph… It’s important to put all the data points into context between your investments and the markets and economies impacting your investments. The graph below is a snapshot of my diversification by sector as of May 2016. First and foremost, the graph tells me that I should rebalance between my consumer defensive and technology sectors with the other deficient sectors. However, I do not like to sell that way, instead I just focus on those sectors when I add new money. The other story it tells when you take the markets into account is that the energy and basic materials sectors are out of favour. This is where the graph can start conflicting with emotions. You may not be happy about the performance of your current energy or basic material investments and the graph is telling you to pour more money in it. This is when you have a chance to buy low and sell high if you can pick a strong company that will bounce back. For me, that’s Suncor (NYSE: SU ), Enbridge (NYSE: ENB ), or TransCanada Corporation (NYSE: TRP ). As for the industrial and consumer cyclical sector, they have just fallen behind due to the movement of the others. When looking at my holdings, I only have 1 investment in each of those sectors and they have been doing fine over the past couple of years. McDondald’s (NYSE: MCD ) is doing remarkably well considering the lull it was in for a while. The sector deficiency isn’t based on performance but rather due to an increase in portfolio size. As it grows, so does the percentage of each sector. The same applies to Canadian National Railway ( TSX:CNR , NYSE:CNI ) Final Graph Reading As you can see, there has been 3 ways to read the graph each with its own story to tell. As I get ready to invest new money, I take into consideration the following: Any investment opportunity too good to pass on The stories of my diversification graph How much I have in a specific holding Readers: What’s your process?