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Three Country Exchange Traded Funds Offer Potential For Investors

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Country exchange traded funds (ETFs) that invest in specific countries’ stocks offer a way to gain exposure to foreign equities, according to Investopedia. The funds can include alternative investments, foreign currencies and commodities.

Three such country ETFs have demonstrated strong uptrend over a long term but have experienced recent pullbacks, providing an opportunity to get in before the next upside wave begins. This obviously assumes the uptrend will continue, but in these cases, signs of weakness have been small.

iShares MSCI Taiwan Capped ETF (EWT)

Source: Investopedia

iShares MSCI Taiwan Capped ETF (EWT) has been steadily rising all year. In June, shares hit a 52-week high, and shares were up roughly 38.7% from their 52-week low price of $26.38 per share.

After hitting a high of $37.49 on Aug. 8, the price fell near $36. If the price rallies above this mark, traders should consider a purchase. At the same time, if the price falls in the short term, traders could consider buying between $36 and $35.60.

The next upside target is $37.75 – the top of the channel. Traders could place a stop/loss order under the most recent low swing just prior to entry. If, for example, the price rises over $36.50, the most recent swing low would be $35.96. If it keeps falling in the short term, the most recent swing low would be $35.30.

EWT invests its assets in 92 securities, focusing on the Taiwanese equity market. However, with more than a fifth of the total exposure on a single company, Taiwan Semiconductor, EWT has a concentration risk.

Hon Hai Precision Industry takes up the second position in the portfolio with a 10.11% share. The rest of the stocks do not comprise more than 2.78% of the fund.

EWT relies strongly on information technology (57.8%), financials (16.8%) and materials (9.4%). It has an expense ratio of 64 basis points

Business optimism remains high in Asia. This, combined with a gain in tech shares, created a positive situation for the fund. Bullishness on the fundamentals of Hon Hai Precision Industry and Taiwan Semiconductor sent Taiwan shares to a 27-year high.

Wisdom Tree India Earnings Fund (EPI)

Source: Investopedia

Wisdom Tree India Earnings Fund has experienced a strong uptrend since early 2017. After reaching a $26.90 high on Aug. 7, the price fell back to the rising trendline at $25.30. The price has already moved from the trendline area, trading at $26.10 on Aug. 16.

Patience is needed in allowing the price to move closer to the trendline before making a purchase. Should the price fall near $25, a stop/loss could be put below $24.20. The upside target is $27.30, which is above the former high.

EPI, with $1.7 billion, is more than nine years old and one of the biggest U.S.-listed India ETFs. EPI year to date is up 26.3%, an advantage of 620 basis points above the MSCI Emerging Markets Index.

India’s economic potential as the world’s biggest democracy and second largest country by population after China has long been heralded. That potential, as measured by EPI, will come to fruition and could continue to do so for several years to come.

Ridham Desai, head of research for Indian equities at Morgan Stanley, said the economic and earnings growth cycle is improving and should support earnings per share growth of 20% per year for the next five years.

During 2003 to 2008, the last major growth cycle, earnings compounded at 39% per year, according to the fund. EPI only holds profitable Indian companies. Its underlying index weights components are based on earnings before its index rebalance, which is a unique strategy among legacy India ETFs.

Historically, Indian stocks are volatile than broader emerging markets benchmarks. EPI, however, has a track record of superior risk adjusted returns. In the last three years, EPI has been 200 basis points more volatile than the MSCI Emerging Markets Index. The ETF is nonetheless up 17.9% over that period compared to 1.2% for the MSCI index.

iShares MSCI Mexico Capped ETF (EWW)

Source: Investopedia

iShares MSCI Mexico pulled back to its rising trendline in August since reaching a $57.72 high two weeks prior. The trendline intersects slightly below $56, where the price stalled in trading between Aug. 9 and Aug. 11.

By Aug. 16, the price traded at $57.11. It will take patience to see if another purchasing opportunity arrives near $56. Whether or not another opportunity occurs, upside target is $59 to $59.50. A stop/loss could be put beneath the recent low of $55.47, but it might make sense to give the trade more room should the price fall back to the entry point and wiggles for a week or two, which often happens.

In addition to concerns about the impact of the U.S. presidency on Mexican stocks, EWW flailed last year because the peso fell. However, EWW is not a currency-hedged ETF, meaning there is no mechanism by which the ETF can benefit from the dollar strengthening against the peso.

While Mexico’s economy is largely export driven, because EWW not currency hedged, a falling peso does not benefit investors in this ETF. With the peso now one of this year’s best performing emerging markets currencies, EWW is benefiting.

Traders see more upside to the Mexican peso. Bloomberg reported that the U.S. Commodity Futures Trading Commission reported professional traders are bullish on the peso for the first time since May. There was a fund dedicated to the peso at one time, but it was shuttered years ago, leaving EWW as the most direct play on the Mexican currency.

EWW often trades at a premium to broader emerging market benchmarks. It holds 62 stocks. More than 45 percent of the fund’s lineup is in consumer staples and financial services.

Some of the bullishness this year can be credited to financial markets realizing that Trump is the U.S. president and despite his campaign rhetoric aimed at Mexico, the two countries’ relationship is mostly unchanged at the moment.

EWW and Mexican stocks are not fully in the clear. A Trump effort to renegotiate the North American Free Trade Agreement poses a possible risk. However, any trade talks are likely to include a push by Mexico to keep the peso stable.

These three country ETFs have exhibited strong uptrends, and there is no significant evidence to suggest the uptrends are over yet. Hence, the pullbacks present buying opportunities. When the price falls back to a trendline, it is a potential trade area, but traders need to be sure the possible reward outweighs the risk and they aren’t attempting to catch a “falling knife.”

EPI, for instance, experienced a hefty fall during the pullback, which is cause for concern. But if the price drops again and stabilizes near the trendline, the selling could lose momentum. This is positive for the bulls. In all trading, one can only put the odds in their favor and risk a small portion of account capital on any single trade.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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3.9 stars on average, based on 8 rated postsLester Coleman is a veteran business journalist based in the United States. He has covered the payments industry for several years and is available for writing assignments.




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Blockchain ETFs: Red Hot But Crypto Not

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Until recently Wall Street has pretty much been sitting on the sidelines of the cryptocurrency boom.  Most of the capital raised has come from ICOs so there have been no fat investment banking fees for Wall Street to feast on. But that is all changing.  

Late last year a tiny struggling beverage company,  Long Island Iced Tea, changed its name to Long Blockchain where upon the shares rose 289% in short order.  Wall Street was quick to notice.

Since then, blockchain ETFs have been raising money faster than you can say Long Island Iced Tea.  It is hard to get a precise amount raised, but a decent guess is well in excess of $1 billion just this year.  This includes over $660 million Global X Robotics and Artificial Intelligence Thematic ETF (BOTZ). This comes after trade reports of $200 million having already been raised before BOTZ.  

The current pace of ETF formation is three times faster than last year explosion of cryoto ICOs.

The Pros: Low Fees, Lots of Liquidity

So the question is raised:  are ETFs the right choice for you?  If you are an active trader, the answer is simple: no way.  Your style is to do your own homework and make your own decisions.   

But if you are the kind of person that only has a few hours a week to devote to you financial interest, there are advantages to consider.

ETF’s or Exchange Traded Funds, are a way for individual investors to get professional money management at bargain prices.  Fees are typically well under 1% and ETFs can be traded with an online broker for pennies.

A random check of several blockchain ETFs showed fees between 0.8% and 1%. Compare that to the typical hedge fund where fees are commonly 2% and you give up about 20% of profits to the general partner.  

The Cons:  No Crypto

Blockchain ETFs don’t invest directly in cryptocurrencies.  Instead, professional analysts and managers seek candidates that either participate in or benefit from blockchain technology.  

Overstock is a popular choice for the fact that it is an online retailer that accepts bitcoin for payment. So is IBM, which is a popular holding.  Beyond that, each ETF is a unique portfolio of publicly traded companies.

Unproven Benchmarks  

When ETFs were created about 25 years ago, they offered real advantage.  In one single transaction, an investor could own each of the individual components of an index such as the Nasdaq 100 market weighted.  The principal benefit is to identify and manage risk.

But do they provide the risk protection that ETFs were created for in the first place?  Personally, I think many investors could be better off simply buying a group of cryptocurrencies.  Here is why.

In the case of blockchain ETFs there is no publicly traded benchmarks like the Nasdaq 100 or others. This seriously weakens the main purpose of tying an ETFs strategy to match a certain time tested benchmark.  In my view, this heightens the risk for the investor. If risks are increased then it is only appropriate the rewards should heightened equally. In this case, we think they are not.

At the present time there is a substantial difference in valuation between common stocks and cryptocurrencies.  With ETFs, the investor is buying into higher risk assets. One of the benefits of crypto investing is their non correlative nature to other assets.  ETF can not offer this benefit.

Blind Diversification

The blockchain ETF that we have looked at so far seem to have low cost and professional management on their side.  However, for the investor they appear to amount to little more than blind diversification with limited upside offered by direct investment in a package of cryptocurrencies.  So before joining the huge wave of investors who seem to have found nirvana, buy 15-20 cryptocurrency names in equal weight and put them in a secure place for the long run. And if you are cheap like me, you will save the EFT fee.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 87 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Are Bitcoin ETFs on the Way?

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CBOE’s intent to list the first bitcoin ETF made its way to Washington’s top securities regulator last week after the exchange called on lawmakers to reconsider their hardened stance toward crypto-backed funds.

CBOE Addresses Concerns Over Crypto Funds

In a Mar. 23 letter to the U.S. Securities and Exchange Commission (SEC), CBOE President Chris Concannon addressed the regulator’s concerns over crypto-market manipulation and fraud.

In the letter, Concannon said the CBOE was uniquely positioned to understand the risks associated with crypto-backed assets, given its success in launching the first bitcoin-based futures contract in December.

“While cryptocurrency-related holdings do raise a number of unique issues, CBOE firmly
believes that such holdings do not require significant revision to the well-established
frameworks for evaluation related to valuation, liquidity, custody, arbitrage, and
manipulation,” Concannon said, adding that “each Cryptocurrency Fund and underlying cryptocurrency-related holdings should be evaluated on a case by case basis in a manner very similar to previous funds and their underlying holdings.”

Despite a rocky start, the CBOE head indicated that bitcoin futures were trading at higher volumes – a trend that is expected to accelerate in the future and possibly bring bitcoin in line with commodity futures.

Concannon’s comments were a direct response to a letter published on the SEC website in January, where the regulator expressed concerns about cryptocurrency to trade associations. In light of those risks, the letter said SEC staff have “significant outstanding questions concerning how funds holding substantial amounts of cryptocurrencies and related products would satisfy the requirements of the 1940 Act and its rules.”

The 1940 Act refers to the Investment Company Act of 1940, which spells out the regulatory responsibilities of investment companies when issuing product offerings.

Multiple Attempts and Failed Starts

The quest for the first bitcoin ETF has eluded several issuers and entrepreneurs over the last 12 months. Would-be investors have been wait-and-see mode ever since Cameron and Tyler Winklevoss had their bitcoin ETF rejected by the SEC last week. Although regulators granted the brothers a second shot to make their case, concerns over manipulation and unregulated markets ultimately prevailed.

About three months ago, several fund managers officially shelved their bids to launch bitcoin ETFs after the SEC expressed long-held concerns over liquidity and valuation. The ETFs in question were brought forward by the likes of Direxion and Exchange Listed Funds, which were developing products designed tot rack bitcoin futures.

Issuers like VanEck and REX ETF also withdrew earlier applications after the SEC ruled on the Winklevoss Bitcoin Trust.

CBOE also submitted proposals to list six bitcoin ETFs last year, according to the SEC’s public filing system. As part of the submission, the exchange proposed specific rule changes that would open the door to bitcoin-related funds.

Much like futures, bitcoin ETFs are seen as a potential game changer for cryptocurrencies because it would enable more traders to access them on the open market. The ETF market is a multi-trillion-dollar industry and one that would likely welcome bitcoin products should the opportunity arise.

There’s no timetable as to when or even if bitcoin futures will hit the market. However, many are convinced that the launching of crypto-backed futures will pave the way for an exchange-traded fund in the not-too-distant future. Many in the industry have speculated that steady interest in bitcoin will lead more issuers to give their listing a go.

The head of ETF research at Morningstar gave a compelling quote back in December during an interview with the Financial Times:

“In a market where the waterfront has largely been covered, this is really the only major project that remains. The futures cover most of the SEC’s concerns by creating a cleared, regulated financial instrument.”

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 497 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Should You Use A Robo-Advisor? If So, How Do You Choose?

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Online financial advice is more available than ever, and more investors are taking advantage of these services. Whether or not a robo-advisor is the right choice depends on the complexity of one’s situation and their comfort level in working with advice that is mainly dispensed online, according to Investopedia.

If an investor’s situation involves complex financial planning issues that extend beyond allocating investments and related services, they might be better served with a more traditional advisor who provides advice in areas such as estate planning.

For millennials and those with more modest portfolios who only require asset allocation advice and basic financial planning help, online advisers could well meet their needs.

One of the major benefits of online advisors is the convenience and ease of accessing their services. Online advisers are accessible 24/7. With today’s busy schedules, this level of accessibility appeals to many investors.

How To Choose

If an online advisor is the right choice, the next question is how to evaluate and decide which robo-adviser to use.

Just as traditional financial advisers vary in their areas of expertise, how they are compensated and the types of clients they work with, the same differences exist among robo-advisors.

Most robo-advisors offer investment advice and portfolio management, Investopedia noted.

One exception among the major robo-advisors is LearnVest, which gives investment recommendations but not ongoing investment advice. LearnVest’s focus is financial planning and budgeting. The company also offers live help via the telephone.

Asset allocation and portfolio management are most robo-advisors’ dual focuses. They usually provide the service via EFTs and algorithms.

Beyond this basic service, robo-advisors provide tax-loss harvesting services which allow investors to take advantage of any losses in their taxable portfolio.

Robo-Advisors Have Different Strengths

Some robo-advisors focus on specialized areas. Rebalance IRA, for example, focuses on managing retirement accounts. The company also provides human interaction.

Folio Investing provides EFTs or stock portfolios. Motif Investing provides portfolios consisting of 30 stocks for a single price. Personal Capital gives clients the ability to manage their investments on a consolidated basis, focusing on customers with higher net worth.

Fees To Consider

Fees differ among robo-advisors. The fees usually run between 0.15% to 0.5% of the managed assets. Some also charge a one-time set-up fee.

LearnVest charges from $89 to $399 for an initial review and $19 per month thereafter.

Personal Capital charges 0.49% to 0.89% of the invested amount.

In addition to fees, there are also expense ratios of exchange traded funds and mutual funds. There can also be transaction costs for trading investments.

The option of interacting with a human about investments also varies among robo-advisors.

Because robo-advisors are fairly new, they do not have a lot of investment history pre-dating the current stock market rally. It is not known at the present time how well most robo-advisors will perform during the next major stock market downturn.

Established Players Enter The Space

Some traditional financial service players have embraced robo-advisors, which can be a consideration in choosing a robo-advisor. Traditional financial services firms have the funds to invest and the time needed to enable the services to grow. In addition, as a client’s need changes, they will be positioned to transition to the more traditional services these firms offer. Financial advisors working with these platforms could be a way to connect with younger clients and cultivate them as future clients.

Betterment, for instance, has partnered with Fidelity Investments. Fidelity’s institutional platform can provide a version of Betterment’s RIA version to its clients. Fidelity has also signed an agreement with LearnVest.

Vanguard has announced its own robo-advisor and is considering introducing the service to more customers in the near future.

Charles Schwab will introduce a financial advisor version of a robo-advisor that will allow advisors using its platform to white label the service to their clients for free. Charles Schwab will profit on the underlying assets.

Investors need to decide which robo-advisor best meets their needs. They need to consider the specific services the robo-advisors offer, the level of human interaction offered, the minimum investment required and any fees and expenses charged.

The growing interest of major financial service firms in this area is clearly a consideration for both prospective investors and financial advisors.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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3.9 stars on average, based on 8 rated postsLester Coleman is a veteran business journalist based in the United States. He has covered the payments industry for several years and is available for writing assignments.




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