Wikinvest Wire
Friday, July 10, 2009
The New Equalweight ETF
We are in Newport, Or. The video, sorry for the poor audio BTW, was shot at Cannon Beach. We have very shaky internet service here so I am timebomb posting the video Thursday afternoon to publish Friday morning.
It is very short so if I have time and a connection I will add a little more later.
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5 comments:
Interesting. I've read about this idea a couple of times, and I used it in a sample portfolio I made up using the Ishares global sector portfolios.
Roger. The idea behind EQL has merit. I hope this ETF succeeds and may purchase some after it develops sufficient volume and a track record. However, going from memory from other articles on EQL, the expense ratio is .55%, with .18% of that being from the underlying ETFs and .37% going for management. Do you think .37% management fee is reasonable for implementing such a simple strategy? Mightn't it be less expensive to implement the strategy by holding a portfolio of the underlying stocks?
Thanks,
JCarr
Haystack rock!! I am from Oregon so it is great to see you checking out the sights! Did you get any good Gorge photos?
I think equal weighting has a lot going for it theoretically as a contender for least bad strategy.
On a related topic, does anyone have an opinion on why the sector rotation etfs didn't outperform during the crash? Is it just an artifact of the sectors that were rotated in during the crash or is it inherent to the strategy?
For sector rotations to work, 1 or more sectors has to be doing well.
To add to Stephen Drone's point, it also depends on the allocation mechanism in use; e.g, most sector rotation mechanism's assume the pacing of a typical business cycle (several years usually) but when a market is beginning to weaken it can roll though a number of sectors faster than that so, like a runner outrunning his own feet on the way to a face plant, the fund keeps rotating into sectors that may have been relatively stronger but for too brief a time.
This keys into a larger theme discussed here often: Consistent with the Black Swan theory, market prices may not be normally distributed and the existence of fatter tails means strategies that worked fine, in some cases for a considerable length of time, can still blow up more frequently than anticipated and, now and then, much worse than normal risk assessment would predict.
Hope that made sense; I'm in a bit of rush to get out the door at the moment.
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