We have previously taken a look at a handful of commodity based ETFs as a way to diversify your investing portfolio. One of the problems with commodity based ETF’s to this point has been that the choices aren’t really representative of the wide range markets represented by the commodity markets. But that is changing over time, for example a new coal based ETF recently caught our eye.
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In a previous post, we talked some about the options mutual fund investors had for investing in gold mutual funds. It turns out there are several options we have, and they are a powerful vehicle for adding diversification to your overall mutual fund portfolio. We covered the diversification of gold mutual funds previously, but this study focused on funds using gold stocks, primarily gold mining stocks. But we often get questions related to the performance of gold funds, and how correlated they are to the actual price of gold.
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What is a foreign currency ETF or exchange traded fund? The first foreign currency ETF was offered by Rydex in 2005, traded as FXE, and it tracks the European Euro against the US dollar.

Now you should be aware that when you are involved in currency trades, you are actually participating in a market that is much larger than the US stock market. The Forex, or foreign currency exchange market dwarfs the US stock market, and is probably the largest financial exchange in the world.
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In volatile market times like those we have had recently, there is a natural increase in interest in hedge mutual funds as a way to protect capital in turbulent times. We surveyed a sample of hedge mutual funds in the past, higlighting a sample of funds that use a variety of techniques to mitigate market risk as part of a hedging strategy. Recently ING has introduced another variant of hedge mutual funds, the ING 130/30 Fundamental Research fund.
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In a previous article we examined whether stocks are riskier than bonds, concluding that they are, but it is also a function of how you hold bonds, whether individual bonds or bond funds. Given that there is a tradeoff of risk between stocks and bonds, the natural question to ask next is how much you should invest in stocks versus bonds. For example, the conventional wisdom is that it should be a function of your age, as we expect your appetite for risk to diminish over time.
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We’ve had a couple of articles on the value of using Morningstar Rankings or Ratings to make your mutual fund selections. It is hard to research mutual funds without running into the Morningstar rankings, you’ll find them even on the brokerage sites like Fidelity or Ameritrade. But the research on how effective a tool they are for predicting a funds future performance does not generally paint a rosy picture. We’ve written on that topic of Morningstar rankings in the past.
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As we discussed in our previous article on our hedged mutual fund portfolio when the market is moving against the bulls as quickly as it has been recently, its time to take another look at risk management strategies, and in this case specifically hedging strategies. There are a number of ways to hedge your mutual fund or ETF position, but our favorite is the use of bear funds or bear ETFs.
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A day like today in the market can make it painful to look at your mutual fund holdings. For example, of the Fidelity Select funds that we track, they were all down anywhere from 0.41% to 3.24% It’s clear that in order to manage mutual fund portfolio risk, diversification alone will not do much on a day like today, when everything is down. (This is an example of what is sometimes referred to as negative co-variance, where market instruments like mutual funds and ETFs tend to be uncorrelated on the upside, but when bad news strikes, they have a greater degree of correlation (i.e. they all go down at the same time).
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What are the best ETFs to trade? We often get questions about the list of ETF’s we use, and why we “only use 50 Exchange Traded Funds” in our system. Aren’t we leaving money on the table, and shouldn’t we be trading all the available ETF’s in order to get the best possible returns from our system?
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Has Googles stock price inflated too far? The “fair valuation” of Google’s stock price, and whether is Google is overpriced is the topic of discussion at many a water cooler these days.

The battle of valuing Google’s stock price, whether based on earnings, cash flow, market share growth, aquisition strategy, or some other form of financial engineering is a discussion that we have little to contribute to. I would make the observation that at a current market cap of over 170 billion dollars, that it’s closer to the top than it is a bottom. To make the case that it could be a Peter Lynch ten bagger would imply that it would get to a market cap of almost 2 trillion dollars, which is a pretty rich valuation by almost anyone’s standard.
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