ETF Watchlist: Week of September 11, 2017

In doing some research this past week, I came upon a thread encouraging readers to talk about their worst investment or stock trade they’ve ever been a part of. It was a fascinating read that reminded me of the one thing that most people don’t feel like talking about. And that is that everybody has losing investments. Everybody. Even the pros. I shared my worst trade on that thread and, in the spirit of having a little fun, I figure I’d share the story here as well!

Around 1999 or 2000, right as the tech bubble was peaking, I bought stock in Internet Capital Group. It is (or was, the company has since transformed into cloud technology company Actua) a venture capital firm for internet startups. I bought the stock right after an analyst upgrade at around $117. Like most tech stocks, the price rose rapidly and, within a few weeks, the stock hit an all-time high of $212. Being young and stupid (and believing at the time that everything was going to continue going higher), I hung on. Of course, the tech bubble burst not too long after as people began realizing that many of these stocks were getting bid up to ridiculous valuations despite having questionable business models and little revenue. Still, I continued to hold on to ICGE for no good reason, and eventually sold some time later for around $45.

Why am I sharing this? Because losses happen. While it was painful seeing a significant gain turn into a significant loss, it taught me to always have a reason for buying or selling something. And also to have a plan for if something goes wrong. Today, there’s no way I’d hang on to a falling knife for that long, so, in that sense, it’s made me a better trader and investor. Losing investments are painful to acknowledge but they make for great learning experiences. If you’ve had a big loser over the years, I’d love to hear about it. I promise that everyone has such a story!

On a brighter note, here are the four ETFs that I’ll be keeping an eye on this week.

iShares U.S. Home Construction ETF (ITB)

Experts are suggesting that the combined economic cost of Hurricanes Harvey and Irma could reach $300 billion, equating to roughly 1.5% of the annual GDP. Given that GDP growth in 2016 was 1.6%, we could very well now be looking at a flat year economically.

We covered insurance companies and ETFs last week and how they will obviously be impacted by the storms (they could be on the hook for $100-150 billion). It’s up to construction companies and homebuilders to begin the massive rebuilding effort on homes, roads, office buildings, bridges and other structures. The Home Construction ETF is up nearly 5% since 8/24 and up nearly 27% on the year.

Others: SPDR S&P Homebuilders ETF (XHB), PowerShares Dynamic Building & Construction ETF (PKB)

Point Bridge GOP Stock Tracker ETF (MAGA)

I’m honestly surprised that it took this long to bring an ETF based on political views to market. Point Bridge just this past week launched an ETF (with the obviously clever ticker symbol) that targets companies that made large contributions, via employee donations or corporate PACs, to the Republican party or Republican candidate campaigns.

I can see the appeal for those wishing to align their investments with their political leanings, but political contributions have nothing to do with corporate performance or value. It seems akin to throwing darts at a wall, and, with an expense ratio of 0.72%, isn’t likely to make your portfolio great.

Vanguard FTSE Emerging Markets ETF (VWO)

Emerging markets has been one of the most popular areas of the market in 2017. The Vanguard FTSE Emerging Markets ETF has taken in about $8 billion this year bringing the fund’s total assets to over $80 billion. One thing to keep an eye on with this fund is its China exposure. The fund was one of the first to add China A shares to its portfolio back in 2015. China now makes up for about 30% of the ETF. China has been a solid growth story lately and the Chinese stock market has been one of the top performing regions in 2017 but the emerging economy may be slowing down and could take the value of emerging markets ETFs with it. Not suggesting that anything imminent is about to happen but it’s worth watching for investors with exposure to this, or any, emerging markets fund.

Others: iShares Core MSCI Emerging Markets ETF (IEMG), iShares MSCI Emerging Markets ETF (EEM), Schwab Emerging Markets Equity ETF (SCHE)

iShares U.S. Technology ETF (IYW)

Apple (AAPL) is holding a media event on Tuesday when it’s expected to announce (well, I guess it’s already leaked so I suppose there’s no “expected” any more) the new iPhone 8. Also leaked was Apple’s 10th anniversary iPhone X which is expected to include facial recognition software and wireless charging capabilities. Apple stock tends to rally into and around these events. It’s up nearly 2% and Monday and could continue to trend higher depending on if anything else is unveiled.

If you want Apple exposure through an ETF instead of owning the stock outright, the U.S. Technology ETF has the largest allocation at nearly 18%. Any of the funds listed below, however, have more than 10% of assets invested in Apple.

Others: Technology Select Sector SPDR ETF (XLK), Vanguard Information Technology ETF (VGT), iShares Global Tech ETF (IXN), iShares Morningstar Large Cap ETF (JKD)

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