Re: All ETFs aren't created Equal..................
Not all ETFs are created equal, especially in a specific category in which we're interested. Sometimes we look at how something will work with AIM's volatility capture. Sometimes at annual expense ratio (hidden cost to us as owners of the ETF). Sometimes we look at the dividend being paid out to us. Finally sometimes we are looking at who's done the best recently.
From a "total return" point of view we might get different answers about what is "best" in a certain category. Here's an example:
Emerging Market ETFs
Category EEM DEM VWO PXH
52 week Hi/Low Ratio 1.51 1.41 1.49 1.52
Annual Expense Ratio 0.67 0.63 0.22 0.85
Dividend (TTM) 2.05% 4.97% 1.95% 2.62%
YTD Performance -13.47% -17.60% -13.74% -26.01%
Depending upon what category we choose, there are different "best" ETFs here. If we hand out Gold Stars for Annual Expenses, then VWO wins and PXH loses. If we're interested in Dividends, then DEM wins and VWO loses. If we are interested in Amplitude of price change during a year, then all are about equal. If we want to know who's done best recently there's a tie between EEM and VNO and PXH does the worst.
So, where does one invest with this sort of choice and review? The answer might vary depending on how one plans to own the fund. Buy/Hold would probably the best short term performance along with low expenses. Buy/Hold might also weigh the dividend in the decision. AIM might choose a very different fund if volatility capture is the only goal.
How would one choose if one is interested in total return while using AIM? Well, dividends should at least compensate for differences in annual expenses. Total Return + AIM would probably ignore shorter term performance while looking at annual high/low trade range for suitability. Certainly during "dull" markets it would be nice to have as fat a dividend as possible. Range bound markets would benefit those ETFs with the largest 52 week Hi/Lo ratio, but in this comparison, there wasn't a huge difference.
So, maybe we need to add another form of review. How about Upside and Downside Capture compared to their respective indexes? This information can be found at the Morningstar.com site under the "Ratings and Risk" heading.
Category EEM DEM VWO PXH EM Index
Upside 1 Yr Capture 72.87 71.46 75.89 76.71 53.83
Downside 1 Yr 96.13 76.33 98.58 103.33 86.78
Up/Down Ratio 0.758 0.936 0.770 0.742 0.620
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Upside 3 Yr 122.61 113.39 122.20 127.13 108.12
Downside 3 Yr 100.42 81.20 93.75 106.65 83.63
Up/Down Ratio 1.221 1.396 1.303 1.192 1.293
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Upside 5 Yr 137.63 n/a 137.49 n/a 128.24
Downside 5 Yr 109.04 n/a 107.92 n/a 100.42
Up/Down Ratio 1.262 n/a 1.274 n/a 1.277
So, even with volatility capture, we might be fooled into picking the most volatile instead of the one that gives us some extra upside capture. Too bad there isn't 5 year data on all of them. But with the data at hand, it would appear that DEM does a superior job of capturing upside vs downside moves. That plus its healthy dividend just might be enough to put it in the lead over other choices.
Since AIM can be adjusted with Split SAFE it would could be fine tuned for the fund's characteristics. Doing so could give the best AIM total return. Other fund category groupings such as "small cap value" can be analysed the same way.
Best regards,
Tom |
