ETF Proliferate

The other day a reader asked me to weigh in on ALPS filing for an MLP ETF. You can read a little more here from IndexUniverse assuming this is what the reader was asking about. The other ETPs in this space (P standing for products) are exchange traded notes which are (usually unsecured) debt obligations of the issuer and not actual baskets of stocks.

I did not find anything in the filing or on the ALPS website that would give an indication of what would be in the fund so without that it is difficult to say a whole lot other than the ETF format is typically preferable, IMO, and obviously some folks are not comfortable picking individual stocks so those folks will have access to the MLP space now assuming the fund actually lists.

This brings me to a thought I had over the weekend as I was reading the Barron's mid-year round table. Felix Zulauf was going into detail about his outlook and how he was positioning. While what he was doing was not especially interesting the way he was doing it was; almost all ETFs. He disclosed a lot of paired trades and a couple of other ideas using ETFs.

When I first started this site I repeatedly made the obvious observation that ETFs would offer access to increasingly more specialized parts of the market and if you think about the number of ETF only shops, or people like Zulauf getting a lot of what they need out of the space or how specialized some of the funds are there really are a tremendous amount of opportunities for do-it-yourselfers to create very sophisticated portfolios with very little single stock risk.

I can appreciate many people will likely never need corn or small cap stocks from South Korea but I believe that investing has proven itself to have become more complex in the last ten years and I think there is very little chance of it becoming simpler anytime soon.

If you've been reading this site for the last almost-six years you've read a lot of posts about country selection and sector avoidance and from here you can look back to see how simple the analysis has been and can be and how most decisions like this can now be implemented with ETFs. The last sentence is not to imply that the countries that have worked before will work in the future--remember this site is about sharing process.

The funniest part of this is that after all the posts about Norwegian fishery stocks a fishery ETF has been filed for. After the several posts about farmland stocks the small cap Indonesia and small cap Malaysia funds that have been filed for could offer a lot of exposure to plantations and the like (we'll have to see how that plays out).

I know people disagree with this line of thinking and are quite content to stick to the same broad indexes that they have always owned. So I think the ball is in your court as far as where you go from here.

There is nothing insane, for example, of having a large portion of your energy exposure in Exxon Mobil (a name we have never owned, it is just an example) and a small portion of your energy exposure in something like the China Energy ETF from GlobalX or the broader EG Shares Emerging Market Energy ETF as two other examples of funds we don't use for now. A mix like that at times will outperform a broader energy fund like the Sector SPDR (XLE) and at other times lag XLE. It would be your analysis that leads you to conclude whether a mix like that or some other mix could add value versus XLE over some long period of time.