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Value Stock ETFs
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About Value Stock ETFs |
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Value Stock ETFs Overview and forecast
Value Stock ETFs are actually quite a mixed bag of ETFs and ETNs operating very much on the fundamental ETF relationship to their various indices or methods. They use either an index or a given base for valuations. The use of the word Value in Value Stock ETFs is based on asset values, used as a measure.
The Value Stock ETFs are also in a modest way vindicating the basic premise of ETFs, most, except the Ultra Shorts, using their spreads effectively in the recent market recovery. This group of ETFs, despite their diversity and many differences between funds, is showing an average of 10%+ return in the second quarter of 2009.
The 12 month returns, however, are also showing the effect of the crash. Being nailed to indices has affected the Value Stock ETFs. The various funds, however diverse, took major hits from ?15% to ?72% over the 12 month period to May 2009. What's immediately noticeable, however, is that there were real differences in their ability to withstand the market crash. The average performance was ?30% to ?40% over the period.
This group can also be viewed as a group of groups. The ALPHADEX ETFs and Ultra Shorts are also represented here, and they're quite different performers. It's more than slightly simplistic to assume that Value Stock ETFs are even related, in terms of actual values. They're all different. Some groups operate
on basic market indices, and some don't.
Short term (6 months)
The level of diversity makes the analysis of the short term complex, but if you work on watching the groups as well as the individual ETFs, it'll make more sense. The groups themselves have common performance characteristics. Some are great traders, some are small, and not too active. In each case, a general mode of behavior for the ETFs becomes clearer.
In the short term, nearly all of the Value Stock ETFs have returned to positive territory, and shown reasonably good trading margins. That said, you can see from our list of Value Stock ETFs that the returns have been pretty different, even among members of groups, in the short term. That's a good indication of the nature of the Value Stock ETFs, a heterogeneous performance being the norm. In six months, they can produce good returns, and they trade well.
Medium term (2 years)
That said about the short term, in the horror months of the crash, they all produced big drops. They generally followed their indices. Some managed to avoid the full extent of the indices' collapse, by as much as 10-15% or slightly more. Not a bad performance, but this is the other side of the basic ETF model. These ETFs are basically index investments, at heart. They can hedge to a point with returns, but the law of gravity hasn't been repealed yet.
The overall view of the medium term for Value Stock ETFs is reasonably good. They were fairly reliable performers before the meltdown, and in a healthy market without asset value worries, their basic principles can work properly.
Long term (5 years)
The Value Stock ETFs are relatively predictable in terms of behavior. Like all ETFs, they're certain to benefit from the usual rise in historical values. The ETF principle is quite sound in that sense, but there are other issues which may affect the long term view. The traditional concepts of market products are changing, and the Value Stock ETFs may lose appeal based on the new global economy and a different investment culture.
However- the more advanced forms of ETF investment are themselves new. Market fashions come and go, but hedging and defensive strategies are always around. Like the mutuals before them, the ETFs can operate well in advanced
economies through spreads and targeting. It's reasonable to expect the Value Stock ETFs to perform well as a class of investment, in the long term.
Qualifiers to projections
The market will demand returns from the Value Stock ETFs. The class includes some of the bigger ETFs, and that sort of money isn't allowed to sit around underperforming for any length of time. The immediate future (2009-11) will include aggressive investment across the markets, trying to undo the devastation of the last year or so.
The previous vulnerability of the Value Stock ETFs to an unprecedented market situation was understandable, given their investment modes. The need now is to compete as a class of investment. They're capable of doing that, and their trading volumes indicate popularity among traders.
Investors need to make comparisons in this class, despite the relatively low historical prices. Performances will tend to vary even more over time, and trading values will move considerably. There are strong potentials in the Value Stock ETFs, but the baseline returns will take a while to return to the positive in the 12 month zone.
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Last Updated on: 2010-01-14 02:03:40 |
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