| Dear Subscriber, With exchange traded funds (ETFs), global stock markets can be sliced and diced in hundreds of different ways. You can invest by country, by geographic region, by industry sector, and by various combinations of all these. Another way to look at the picture is by company style. Some stocks are more tilted toward growth and others toward value. In a growth stock, the company is still trying to expand and probably reinvests a big part of any profits back into its business. Apple (AAPL) is a good example. Value stocks, typically found in more mature industries, tend to be more stable and throw off regular income via dividends. Altria (MO) is a well-known value stock. Style-based investing is frequently combined with market capitalization that breaks down companies by their size. From smallest to largest, you might have micro-cap, small-cap, mid-cap, large-cap, and mega-cap. Put the two methodologies together and you get the familiar 9-square "style box," originated by Morningstar, containing segments like large-cap growth and mid-cap value. Momentum shifts around through these categories based on economic and market conditions. Stay ahead of the wave and you can make a tidy profit. Get behind it and you can lose your shirt. Small-Cap Growth Zooming Ahead! Right now, my proprietary indicators show a sharp divergence between the best and worst corners of the style box. Small-cap growth is moving up way faster than anything else. Over the last few months, my analysis shows a key small-growth benchmark is climbing at a 40 percent annualized rate! Meanwhile, large-cap value, while not trending down, is nowhere near as attractive. The large value index I watch is growing at a relatively mild 10 percent annualized rate. Why is this happening? One reason may be that stock market investors are increasingly willing to take on risk — something that is definitely found in small-growth stocks. At the other end of the scale, large-value benchmarks are dominated by banks and other sectors that are relatively unattractive right now. Yes, we're looking in the rear-view mirror here, and the near future may or may not resemble the recent past. That's always the case. Nevertheless, I've found that following the trend is usually a good strategy. | Internal Sponsorship | 8 Forecasts for 2011 | | We have just posted our investment forecasts and first recommendations for 2011 online. These forecasts have enormous implications for every dollar you have invested and every penny you count on for your retirement. They also offer you a solid pathway to prosperity in 2011 — both by protecting your wealth and by helping you grow it faster than you may now believe possible. Click here to learn more about what we see coming in 2011. | If you're an equity trend-follower, then you need to take a strong look at the small-growth niche. Here are some ETFs you may want to consider. These two track the Russell 2000 Growth Index: - iShares Russell 2000 Growth (IWO)
- Vanguard Russell 2000 Growth (VTWG)
And these ETFs try to match the S&P 600 Small Cap Index: - iShares S&P SmallCap 600 Growth (IJT)
- Vanguard S&P Small-Cap 600 Growth (VIOG)
This raises an interesting question ... If Two ETFs Follow the Same Index,
Which Should You Buy? There are a couple of factors to consider ... First, which fund has the lowest expense ratio? Operating costs are critical in an index fund. As long as the fund sponsor is a large, well-known firm (as both iShares and Vanguard are), there is no reason to pay any more than you must. The two Vanguard ETFs have a slight edge with expense ratios of 0.20 percent vs. 0.25 percent for both iShares offerings. Second, look at liquidity and trading costs. IWO and IJT are both heavily traded and have minimal bid-ask spreads. VTWG and VIOG are relatively new and haven't built up large trading volumes yet. But I think it's just a matter of time. For individual investors, trading commissions may be a bigger factor. And if you have an account at the right brokerage, you can trade the above four ETFs for free. For instance, clients of Fidelity Brokerage can trade IWO, IJT and some other iShares products with no transaction fee. Vanguard offers fee-free trading for VTWG and VIOG through its own brokerage affiliate. | External Sponsorship | How to Avoid a Retirement Disaster | | Retirement can be the best time of your life. Even if you have a $500,000 portfolio, you may not have enough money to enjoy it. "The 15-Minute Retirement Plan" is loaded with information that can help you plan for a secure retirement. Click to Download Your Guide! | So if you are already set up with Fidelity, you are probably better off with the iShares ETFs. Vanguard fans will likely find their firm's proprietary ETFs are more cost-effective. For more sophisticated traders, now may be a good time to capitalize on the wide momentum spread between small-growth and large-value. You can do this by pairing one of the small-growth ETFs with ProShares UltraShort Russell 1000 Value (SJF). This ETF seeks daily investment results, before fees and expenses, that correspond to twice (200 percent) the inverse (opposite) of the daily performance of the Russell 1000 Value Index. Since SJF is leveraged and the other ETFs named above are not, you'll need to adjust the amount you invest in each accordingly. Will the trend change? You bet it will! I fully expect to see the tables turned at some point, when we will see small-cap growth lag behind large-cap value. Will it be soon? That's a tougher question. All I can say is that right now, small-growth is the style to consider owning. Best wishes, Ron P.S. This week on Money and Markets TV, we check in on the health of the U.S. economy, and offer our prognosis for the pace of recovery in 2011. So for some concrete investment ideas, based on the economic outlook of all the Weiss Research editors, be sure to tune in tonight, December 9, at 7 P.M. Eastern time (4:00 P.M. Pacific). Simply go to www.weissmoneynetwork.com and follow the on-screen instructions. Access is free and no registration is required.
About Money and Markets For more information and archived issues, visit http://www.moneyandmarkets.com Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Nilus Mattive, Claus Vogt, Ron Rowland, Michael Larson and Bryan Rich. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Amber Dakar, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig. Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph: This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com. From time to time, Money and Markets may have information from select third-party advertisers known as "external sponsorships." We cannot guarantee the accuracy of these ads. In addition, these ads do not necessarily express the viewpoints of Money and Markets or its editors. For more information, see our terms and conditions. View our Privacy Policy. Would you like to unsubscribe from our mailing list? To make sure you don't miss our urgent updates, add Weiss Research to your address book. Just follow these simple steps. | © 2010 by Weiss Research, Inc. All rights reserved. | 15430 Endeavour Drive, Jupiter, FL 33478 |
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