Tag Archives: japanese

5 ETF Ways To Keep Volatility At Bay

The Fed is poised to hike the benchmark interest rate in two weeks after almost a decade, oil prices are hitting fresh lows on supply glut and overvaluation concerns over the U.S. market are doing the rounds. Together, these aren’t creating the best backdrop to invest in the equity markets. Moreover, the slowdown in China and the eurozone, the recession in several emerging markets and a technical recession in the Japanese economy continue to cast a shadow over global growth. Plus, broader commodities are slouching, putting mining companies at risk. The sought-after investment broker Goldman Sachs expects weakness in the market next year, with the S&P 500 predicted to close out 2016 at 2,100. The U.S. index presently trades at 2,088, implying almost no change in gains in the coming 13 months. Among the top ETFs, investors have seen the S&P 500-based fund SPY adding about 1.4% and the Dow-based fund DIA losing about 0.3%. Only the tech-laden Nasdaq-based fund QQQ has advanced 11% so far this year (as of December 7, 2015). Higher interest rates post lift-off will result in a stronger greenback, which, in turn, curtailed the profit outlook of the companies. In Q3, earnings from the S&P 500 were down 2.4%, while revenues declined 3.9%. As per Zacks Earnings Trends , earnings for Q4 are projected to be down 6.5% on 3.4% lower revenues. Though the majority of the Fed’s lift-off move is priced in at the current level and the investing world is expecting a slow and small rate hike trajectory, as the U.S. economy is yet to attain the central bank’s inflation goal, a certain level of initial shocks are inevitable once the step is taken. This might lead many investors to seek refuge in low-risk products rather than sticking to highly volatile options and enduring the economic data and Fed-infused storm. In such a scenario, the low-volatility products could be intriguing choices for those who want to stay invested in domestic equities, but like the idea of focusing on minimum volatility. Low-volatility ETFs generally tend to offer positive risk-adjusted gains, though not huge. Investors should note that in down years like 2015, low-volatility products outperform the traditional benchmark. Over the long term as well, low-risk products are seen to surpass the high-risk securities. Below, we highlight five low-volatility ETFs and offer the key features of each so that you can find out which of them is best suited to look after your portfolio . PowerShares S&P 500 Low Volatility Portfolio ETF (NYSEARCA: SPLV ) This $67.1 million low-volatility ETF consists of the 100 stocks from the S&P 500 Index with the lowest realized volatility over the last one year. The fund is heavy on Financials (28.2%), followed by Consumer Staples (21.3%), Industrials (16.7%) and Healthcare (12.4%). It charges 25 bps in fees. SPLV is up over 2.2% so far this year (as of December 7, 2015), and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. PowerShares S&P MidCap Low Volatility ETF (NYSEARCA: XMLV ) This overlooked ETF looks to follow the S&P MidCap 400 Low Volatility Index. The product invests about $118.4 million in assets in 80 stocks. From a sector look, Financials make up half of the portfolio, followed by about 11.26% of assets invested in Industrials and 10.54% in Utilities. The portfolio has minimal company-specific concentration risk, with no company accounting for more than 1.71%. The product charges about 25 bps in fees. It is up 5.4% so far this year. iShares MSCI USA Minimum Volatility ETF (NYSEARCA: USMV ) USMV measures the performance of equity securities in the top 85% by market capitalization of U.S. equities that have lower absolute volatility. It has garnered an asset base of $6.85 billion. This fund is home to 171 securities in total, and assigns double-digit allocation to the Financials (21.2%), Healthcare (19.6%), Information Technology (15.71%) and Consumer Staples (14.43%) sectors. The product also has an edge over its peers when it comes to expenses, as it charges a fee of just 15 basis points annually, while it yields about 1.89%. It has delivered a return of over 4% so far this year. PowerShares S&P 500 ex-Rate Sensitive Low Volatility Portfolio ETF (NYSEARCA: XRLV ) This ETF has already amassed over $113 million in assets. It offers investors dual benefits. First, it is targeted at low-risk stocks, and second, it is insulated from the impending Fed rate hike, as it considers stocks which are less rate-sensitive. Holding 100 stocks in its basket, the fund dose not put more than 1.29% of the total in a single security. It is heavy on Financials (28.2%) and Industrials (21.5%). It charges 25 bps in fees. This product has returned 3.2% in the year-to-date frame (as of December 7, 2015). SPDR Russell 1000 Low Volatility Focus ETF (NYSEARCA: ONEV ) This brand-new ETF gives exposure to low-volatility investing in large cap equity securities. The 424-stock fund is heavy on Financial Services (20.2%), trailed by Consumer Discretionary (16.62%), Producer Durables (15.98%) and Consumer Staples (12.2%). It charges 20 bps in fees. Original Post

Is Abenomics 2.0 Boosting Japan Mutual Funds?

In late September, Japanese Prime Minister Shinzo Abe had announced the second stage of his popular Abenomics plan. The “stage two” plan is aimed to resuscitate the Japanese economy. Among other things, the goal is to boost Japan’s gross domestic product by a significant 20% to $5 trillion by 2020. Following this, Japan Stock mutual funds have gained relatively well. In October, the sector gained 7.9% and in November Japan stock funds added 1.3%, which helped it to finish among the top gainers for the month. Morningstar data also shows that Japan Stock funds are leading one-month gains currently. Abe unveiled a new set of economic initiatives, which he dubbed as “Abenomics 2.0.” He promised to take Japan into a new era of prosperity. His proposals have, however, been met with both bouquets and brickbats. Some economists and market watchers have questioned the viability of the proposals. For instance, executives from leading business lobby termed Abe’s numerical targets as “outrageous” and “impossible.” During the first phase of Abenomics, Japan’s benchmark, Nikkei 225, had shown a significant uptrend. Though it is too early to predict whether the new targets are already having a positive impact, Nikkei 225 has gained 4.5% since Sept. 29. The focus once again shifts to Japan mutual funds, which were topping the charts earlier this year before stumbling in the third quarter. Japan’s economic situation is not as fragile as is widely believed. So, it’s not a bad idea to pick Japan mutual funds which are poised to benefit under existing conditions and will gain further as the economy continues to gather steam. Abenomics 2.0: The Three Arrows Abe outlined several new policy measures late last month, which he calls “Abenomics 2.0.” Abe spoke of new targets or his new “three arrows”: achieving a higher GDP over the next five years, providing support for child care and better social security. The last two are aimed at improving child rearing and care for the elderly for economically distressed families. Abe also aims to boost social security by offering care to the nearly 150,000 people who are slated to enter nursing homes. He also said that he would increase employment opportunities for the retired. Several prominent newspapers and economists have questioned where Abe will find the resources to fuel the last two initiatives. Has There Been A Positive Trend? Market watchers and economists have also pointed to the fact that several of Abe’s initial targets are still unfulfilled. Others question the efficacy of the first phase of Abenomics and have argued that only the monetary policy has proven to be effective. However, an assessment of the state of Japan’s economy by the Financial Times tells us a different story. The study has praised Abenomics’ record on improving corporate governance standards. The objective of these changes has been to increase return on equity and raise the number of independent directors. The ability to push through reforms in the agricultural sector has also been praised. Japan’s unemployment rate of 3.3% is much lower than several developed economies. Real monthly wages recorded their first yearly increase in July in more than two years. Additionally, the average wage increase for fiscal 2015 is 2.2%, the highest level achieved in 17 years. Japan Mutual Funds Japan Stock fund category had emerged as the best gainer in the first half of 2015. The market rout since then has dragged down major categories. However, Japan funds were less affected than its neighboring regions. Japan funds are up nearly 14% year to date, according to Morningstar. This is the best year-to-date gain so far among all fund categories. Banking on the optimism, investors interested in investing in Japan region may bet on the following three mutual funds. These funds carry either a carry a favorable Zacks Mutual Fund Ranks. The following funds carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy) as we expect the funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance. The minimum initial investment is within $5,000. These funds are in the green over year to date and one-year periods. The three- and five-year annualized returns are also favorable. Fidelity Japan Smaller Companies Fund No Load (MUTF: FJSCX ) seeks capital appreciation over the long term. It invests most of its assets in Japanese securities or other instruments economically connected with Japan. FJSCX invests in securities of companies with market cap similar to those listed in Russell/Nomura Mid-Small Cap Index or the Japanese Association of Securities Dealers Automated Quotations (JASDAQ) Index. Fidelity Japan Smaller Companies currently carries a Zacks Mutual Fund Rank #1. FJSCX has gained 13.7% and 13.5% over year-to-date and one-year periods, respectively. The three- and five-year annualized returns are respectively 18.7% and 12%. Annual expense ratio of 1% is lower than the category average of 1.43%. T. Rowe Price Japan Fund No Load (MUTF: PRJPX ) invests a lion’s share of its assets in companies located in Japan. The fund invests in companies of all sizes and across Japanese industries. Managers use a bottom-up stock selection process while also being aware of industry outlooks. T. Rowe Price Japan currently carries a Zacks Mutual Fund Rank #1. PRJPX has gained 16% and 11.7% over year-to-date and one-year periods, respectively. The 3- and 5-year annualized returns are respectively 12.7% and 7.8%. Annual expense ratio of 1.05% is lower than the category average of 1.43%. Rydex Japan 2x Strategy Fund A (MUTF: RYJSX ) seeks to give returns that correspond to two times the performance of the fair value of the Nikkei 225 Stock Average. RYJSX invests in common stocks having market capital within the range of those listed in the index. RYJSX invests a lion’s share of its assets in securities that have the potential to return two times the performance of the underlying index. Rydex Japan 2x Strategy Fund Class A currently carries a Zacks Mutual Fund Rank #2. RYJSX has gained 20.3% and 11.8% over year-to-date and one-year periods, respectively. The three- and five-year annualized returns are respectively 20% and 6.8%. Annual expense ratio of 1.54% is lower than the category average of 2.03%. Original post

IVA Funds Annual Report

The IVA International and Worldwide Fund have had great returns. Both fund hold high amounts of cash. The holdings are very diversified. The IVA International Fund (MUTF: IVIQX ) and the IVA Worldwide Fund (MUTF: IVWIX ) have come out with an Annual Report, which can be found here . Charles de Vaulx and Chuck de Lardamelle are two very well known value managers who run diversified portfolios with some stocks that you won’t see anywhere else. The Worldwide has averaged 9.03% (Institutional Class) since October 1, 2008, versus 6.03% for the MSCI All Country World Index. The International (Institutional Class) has averaged 9.00% over that time frame. Both very good returns. The Worldwide Fund has a broad portfolio including: 4.6% in gold, 3.5% in Berkshire Hathaway (NYSE: BRK.A ), and 3.3% in Astellas Pharmaceuticals ( OTCPK:ALPMY ). What is interesting is that the fund holds 35.2% in short term investments and 3.2% in sovereign bonds. So almost 40% in cash and over 5% in gold and gold mining. Looks to me like they’re pretty bearish on things. 22.9% of the portfolio is in the U.S., 6% France, and 7% Japan. According to the Annual Report: Our currency hedges helped to offset losses from the strong U.S. dollar, contributing 1.5% to return. At the end of the period, our currency hedges were 51% Japanese yen, 39% Australian dollar, 29% South Korean won, and 30% euro. What I love about these funds is that you just can’t find these stocks any place else. Who else owns Hong Kong & Shanghai Hotels ( OTCPK:HKSHY )? It’s a 50 cent dollar. It’s probably trading at half of net asset value. Who owns bonds in French conglomerate Wendel ( OTCPK:WNDLF )? Their holdings are off the wall and I love it! I don’t need active management to buy Coca-Cola (NYSE: KO ) and GE (NYSE: GE ). Why pay a high fee for glorified index funds. The International Fund has a similar make up to the Worldwide Fund. 35.2% are short term investments, 8.5% in fixed income, and 4.6% in gold. These are not your run of the mill mutual funds. These managers are allowed to invest as they feel. Some of the larger holdings are the same as noted above plus Nestle ( OTCPK:NSRGY ), Newscorp (NASDAQ: NWS ), and Samsung ( OTC:SSNLF ). International hedged its currencies as well which helped to mitigate the strong dollar. Barron’s wrote an article on the two funds. The article suggests that independent fund companies like IVA have lower fees and less conflicts of interest than funds owned by Wall Street banks. I tend to agree. Are these two managers going to jump ship for higher pay? Probably not as they most certainly have ownership in the firm. I suggest you go to the link and look at the Annual Report. There are so many names that you are probably not familiar with that you are bound to learn something. The Institutional Class’s expense ratio is 1% for each fund. I find that to be quite reasonable. de Vaulx and de Lardamelle have done a good job managing these funds. Putting together a portfolio like this is very difficult for the average person. You may be able to buy American blue chips but can you buy foreign bonds and then hedge the currencies? Probably not. Though the funds are closed to new investors, perhaps they will open again in the future. They are a good addition to a portfolio. Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.