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Buy Europe Without Euro Risk With This New ETF

Euro zone’s celebration of the end of a prolonged recession last year was really short-lived as the region again got itself entrapped in a slowdown and deflation worries from mid 2014. Most of the foremost nations of the continent are presently dragging their feet in terms of economic growth, with some slipping into another recession. To fight these issues, the European Central Bank (ECB) is resorting to every possible step including ultra-low policy rates, negative deposit rates and launch of a program to buy back asset-backed securities and covered bonds. If this was not enough, the ECB indicated that it would implement a broad-based QE measure should the region need it (read: Euro Zone Gets QE Hints, 3 ETFs to Buy on Stimulus Hopes ). While these measures should boost the stock market rally, a flush of liquidity is having an adverse impact on the currency, the Euro. The currency lost about 8% (as of December 12, 2014) against the greenback in the last six months. The plunge was more prevalent given the dollar’s strength during the said phase. Thanks to the Euro slide and the possibility of a strong dollar following the probable hike in interest rates next year, investors are starting to embrace currency-hedged ETFs in droves. There isn’t anything more unfortunate than seeing one’s otherwise impressive portfolio choices fail because of soft foreign currency (read: Hedged European ETFs in Focus: Best Choice for Europe Now? ). Bearing this sentiment, Deutsche Asset & Wealth Management recently rolled out a hedged version focused on Europe recently, DBEZ . Let’s discuss the fund in greater detail below: DBEZ in Detail The fund looks to follow the MSCI EMU IMI U.S. Dollar Hedged Index to provide exposure to more than 600 of the largest European companies. As of November 5, 2014, the index includes 682 securities with an average market cap ranging from about $6.09 billion to about $23.96 million. The product is highly diversified with no stock accounting for more than 2.78% of the portfolio. Among individual holdings, Bayer AG-Reg takes the top spot, followed by Total SA and Sanofi with, respectively, 2.62% and 2.56% exposure. Sector wise, Financials gets the highest exposure with 22.8% of the portfolio. Consumer Discretionary, Industrials, Materials and Consumer Staples also get double-digit investments, while Health Care gets the least exposure with only 4.8% of the basket. As far as country exposure is concerned, Germany (29.55%) gets the top priority while France (29.65%), Spain (11.57%) and Italy (7.86%) take up the next three positions. The fund charges 45 bps in fees. How Does it Fit in a Portfolio? The fund is a good choice for investors seeking exposure to the Euro zone. At the same time, it is a tool to safeguard investors from negative currency translations. Health of the Euro zone companies also appears stable as evident by impressive corporate earnings in Q3. As per Reuters , net earnings for 36% of total market capitalization reported so far are up 7.1% on almost flat revenues with beat ratios of 67% and 59%, respectively. If this was not enough, about 80% of ECB banks cleared the latest stress test. This, coupled with an accommodative central bank, undoubtedly warrants a look at the Euro zone to earn some quick gains. However, this return can be curtailed on repatriation as the U.S. dollar is hovering at multi-year highs on QE taper and rising rate risk for next year. In such a scenario, possessing DBEZ, which is protected from currency translation, in one’s portfolio might be a wise decision (read: 3 European ETFs Worth Considering on ECB Measures ). Competition The European ETF space is pretty competitive, so it could be slightly tough for the new entrant to build up assets. However, we are hopeful as the hedged ETFs space still has room to grow. The issuer itself has a product in the name of Deutsche X-trackers MSCI Europe Hedged Equity ETF (NYSEARCA: DBEU ) which offers exposure to more than 400 European stocks in developed markets while at the same time providing a hedge against any fall in a number of currencies in the region including the Euro, the British pound, and the Swiss franc to name a few. Making a debut last year, DBEU has become a $680 million fund. However, the topper among the hedged ETFs list is WisdomTree Europe Hedged Equity Index Fund (NYSEARCA: HEDJ ) which has generated about $5.2 billion in assets so far. Moreover, there is a flurry of single-country hedged ETFs in this space including ones targeting Germany, which could offer up some competition. However, investors should note that Deutsche Bank has proven its skills in offering successful hedged ETFs lately in different markets. So, the profound knowledge of the issuer on this subject might help the new entrant to garner considerable investor assets.

The ABCs Of Mutual Fund Share Classes

Originally published on Nov. 19, 2014 You don’t need to read a prospectus to benefit from knowing the basics about mutual fund share classes. It will help you uncover your actual investing costs (especially when dealing with a broker), avoid unnecessary fees, and boost long-term performance. As you will see, even after you select a fund, it is crucial that you choose the most appropriate share class of that fund. Bringing Funds to the Marketplace Just like a farmer needs to get their crops to market, mutual fund companies work through multiple distribution channels to sell their products. These could include direct sales via online brokerages, sales to pension plans, through a broker, a registered investment advisor, and so forth. Each of these channels has different end clients and associated costs; and because of this, companies have developed different versions (share classes) of the same mutual fund to suit each situation. Typical Mutual Fund Fees Annual Expense Ratio – The ongoing fee to manage and administer the fund. Most investors will never notice this cost since it’s a tiny fraction taken from the share price (NAV) each day. Trading fee – A fee charged by the executing brokerage company/custodian, typically $0 to $50 per buy or sell order. Front-end Load – A sales charge applied when a fund is bought; it typically declines for larger purchase amounts. Back-end Load – A sales charge applied when a fund is sold; it typically declines over several years. Fund Share Classes with an Example “A” shares have a front-end load. “B” shares have a back-end load, but have a lower expense ratio if held long enough. “C” shares have no load after a short time, but have a higher expense ratio. Other shares such as “D” or “Institutional” exist. These shares typically have no load, but may have limited availability. The well-known Pimco Total Return Fund (MUTF: PTRAX ) provides a great illustration of how one mutual fund offers many different share classes of the same fund. Broker Assisted Investors After considering the overall costs from the table above, you will see where the costs are built into the mutual fund structure and sales channels. Brokers are typically compensated by the A, B, or C share classes, but also can get residual compensation via fees built into the mutual fund expense ratio (e.g. 12b-1 fees). Remember, brokers do not have a legal obligation to put you in the “right” share class. So if you are using a broker, be sure to give them more information on how you plan to invest or you could end up paying them larger fees than you should. With a broker for example, if you knew you were going to buy $10,000 of the Pimco Total Return fund, but sell it within 3 years, you will probably be better off with the “C” shares. However, if you have no idea how long you will hold the fund, the “B” shares may be a better bet – since the costs to own will decrease over time. If you had a substantial amount to invest for a long time, the “A” shares may ultimately be the cheapest option even though you are paying the 3.75% front-end load. Advisor Clients Registered Investment Advisors like us typically have “Institutional” share classes available to them. At our firm, we pay close attention to fund expenses and transactions costs for our clients. Because of this, we will frequently use more than one share class of the same fund, or two slightly different funds in the same asset class – all in order to minimize the long-term costs for our clients. It is certainly more complex to juggle the various share classes in a portfolio, but we believe you can use them to your distinct advantage.

5 Healthcare Mutual Funds To Strengthen Your Portfolio – Mutual Fund Commentary

When markets are passing through choppy waters, investors often rely on the healthcare sector to safeguard their investments. This is because the demand for healthcare services does not vary with market conditions, making them a safe haven during difficult times. Many pharma companies also generate regular dividends, which go a long way in softening the blow dealt by plummeting share prices. Mutual funds are the perfect choice for investors looking to enter this sector since they possess the advantages of wide diversification and analytical insight. Below we will share with you 5 potential health mutual funds . Each has earned either a Zacks #1 Rank (Strong Buy) or Zacks #2 Rank (Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all health funds, investors can click here to see the complete list of funds . Putnam Global Health Care A (MUTF: PHSTX ) seeks capital growth. The fund primarily invests in growth, value stocks or either type of stocks of mid and large cap healthcare companies. The companies may be ones that provide health care related services, or those who develop or manufacture pharmaceuticals and biotechnology products. The non-diversified healthcare mutual fund returned 31.9% over the last one year. The fund has an expense ratio of 1.14% as compared to category average of 1.43%. Fidelity Select Medical Delivery Portfolio (MUTF: FSHCX ) invests largely in companies that own or are involved in operating hospital and nursing homes, and are related to health care services sector. The fund focuses on acquiring common stocks of both U.S. and non U.S. companies. The non-diversified healthcare fund returned 26.9% over the last one year period. Steven Bullock is the fund manager and has managed this healthcare mutual fund since 2012. T. Rowe Price Health Sciences (MUTF: PRHSX ) seeks capital growth over the long run. It invests the majority of its assets in common stocks of companies whose primary operations are related to health sciences. The fund focuses on investing in large and mid-cap firms. It may also invest in non U.S. securities. The healthcare mutual fund returned 35.8% over the last one year period. As of September 2014, this fund held 155 issues with 5.57% of its assets invested in Gilead Sciences Inc. Prudential Jennison Health Sciences A (MUTF: PHLAX ) utilizes the bulk of its assets to purchase equity securities of companies in the health sciences sector. It invests in companies all over the globe. It may also invest in IPOs. The fund may invest over 5% of assets in a single issuer. The non-diversified healthcare fund returned 40.4% over the last one year period. The fund has an expense ratio of 1.18% as compared to category average of 1.43%. Franklin Biotechnology Discovery A (MUTF: FBDIX ) seeks long-term capital growth. The fund invests a lion’s share of its assets in companies involved in biotechnology and discovery research activities. Additionally, the company may invest a maximum of 20% of its assets in securities issued by foreign or domestic companies. The non-diversified healthcare fund returned 37.9% over the last one year period. As of September 2014, this fund held 112 issues with 9.29% of its assets invested in Celgene Corporation.