Tracking the Best ETFs in May

Sell in May and go away? Well, that wasn’t very good advice this year, especially if you were allocated to emerging markets and, in particular, India and Russia.

The table below shows the top-performing exchange-traded funds (ETFs) during May (excluding leveraged funds). As you can see, the list is dominated by India, with returns of more than 22% in the top three India-centric funds.

The gains were so good in the small-cap segment of the Indian market that we were able to close out a profit of nearly 27% in the India Small-Cap Index ETF (SCIF) in the Successful ETF Investing newsletter advisory service. Moreover, we captured that gain in just three weeks to serve as a testament to very good timing, as well as the power of country-specific ETFs in hot sectors.

One thing that makes a sector hot, especially when it comes to country-specific funds, is some type of major political change or policy reforms. In the case of India, the gains really started when it became clear that the Indian people were about to elect the pro-business Bharatiya Janata Party, or BJP, and particularly the BJP Party leader Narendra Modi to the post of prime minister. The market loved this development, and hence the big gains in our SCIF position.

The second market on this list making bullish waves in May is Russia. Now, with all of the bellicose political headlines over the past several months between Russia, the Ukraine and Crimea, you might think that Russia is a market to avoid at all costs. Well, this view would be both short-sighted and wrong.

The chart here of the Market Vectors Russia ETF (RSX) shows the big move higher in the Russian equity market since mid March. Interestingly, though RSX is trading above its 50-day moving average, it has not yet broken resistance at the 200-day moving average of $26.01.

If the buying continues in RSX, it could be the catalyst for a very bullish move above the 200-day average — and that could foist this fund into even bigger gains in the latter half of 2014.

ETF Talk: Emerging Markets Show Potential

Most emerging-market exchange-traded funds (ETFs) are broad-based investments in a universe defined largely by geography. This investment approach is fueled by economies that are driven increasingly by wealthy and better-educated populations in emerging markets. With emerging markets typically growing faster than developed ones, investors who lack the time to investigate and understand the unique properties of each such market can invest in broad, diversified emerging-market funds.

Emerging Global Advisors is an ETF provider that tries to research and find the best emerging markets to include in its funds. The company’s 17 ETF offerings, called EGShares, are aimed at letting investors use investment strategies for emerging markets that focus on core positions and developing market themes that are expected to offer the most potential. The provider uses indices that contain only developing market growth themes to exploit market trends, while excluding any holdings that the International Monetary Fund categorizes as developed. Emerging Global Advisors ETFs let you approach emerging markets with a less country-specific focus, in case you like diversification when investing in higher-risk and higher-reward opportunities.

Emerging Markets Dividend Growth (EMDG) is one of the provider’s funds. EMDG invests in 50 emerging-market companies with a high compounded annual dividend growth rate. It currently is most heavily invested in Brazil, Russia, Indonesia and China. The fund has gained 3.9% so far this year and it has issued three quarterly dividends since its inception in July 2013. Thus, it offers investors a bit of income, too.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful ETF Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

ETF Snapshot: It’s a BRIC House, Baby

The acronym BRIC, which stands for Brazil, Russia, India, China, came into the market’s collective conscience in 2001. Since then, it has become a powerful investment theme.

Recently, that theme has waned, and many are now negative on the BRICs. After a decade of rapid growth induced by cheap credit, a commodity boom and a push to globalize, many analysts feel a deceleration in BRICs is looming.

We believe that despite a recent slowdown in the rapid growth of some BRICs, there still are significant profit opportunities in the segment. A case in point is the India market, which is up about 25% year to date. Long term, we believe BRICs will continue to offer strong performance. Thus, BRICs should be monitored closely.

Below are several reasons supporting this thesis, along with our top 10 ETFs designed to help investors gain exposure to BRICs.

Valuation:
As of mid-May, Brazil was trading at a price-earnings (P/E) ratio of 16.2, while the P/E’s were 6.4 for Russia, 18.1 for India and 9.9 for China. Perhaps you may have missed the train on India; however, Russian and Chinese equities are still at potentially very attractive levels for value-conscious investors.

Technical:
The individual BRIC ETFs, as well as the broad market BRIC ETFs, have all enjoyed a recapture of long-term moving averages. Although the long-term averages could get tested, they now serve as support for any pullbacks.

Psychology:
After several months of outflows, April saw a reversal of fortune. Not only did emerging markets see inflows, the iShares MSCI Emerging Market ETF (EEM) garnered the most assets of any other ETF. While one month does not make a trend, let’s monitor closely.

To see which funds made my top 10 list of favorite BRIC ETFs, just check out the ETF Snapshot today!

NOTE: Fabian Wealth Strategies is a Securities and Exchange Commission-registered investment adviser, and is not affiliated with Eagle Financial Publications.

Introducing the New Successful ETF Investing

After nearly four decades of helping investors make money, the one thing we know is that in order to continue delivering the best possible investment advice, we have to keep evolving and keep adjusting to the tools the market provides. This is a philosophy that my father, Dick Fabian, held when he first started the flagship Fabian publication, and this is a philosophy that still operates at the core of our business approach.

Our belief is that ETFs will continue to dominate the investment landscape, and that means they also should be the primary vehicles in your investment portfolio. With that concept at the forefront, I am proud to introduce the new Successful ETF Investing.

Our newly redesigned, revamped, and renamed publication offers an enhanced focus on ETFs, a focus that includes new sections, new features and new portfolios to help income, growth and even very aggressive investors make more money.

One example of a pick designed for the aggressive investor is the recent addition of a small-cap, country-specific ETF in one of the hottest emerging market countries in Asia. This ETF is up more than 15% during just the past week, and that’s the kind of profit potential we’re seeking in our new aggressive recommendations.

We are very proud of our tuned-up version of Successful ETF Investing, and we know you’re going to love it. Check out Successful ETF Investing right now to discover what it’s all about.

How to Avoid the Knockout Punch

“The knock-out punch is always the one you never see coming.”

–Aimee Mann

Singer/songwriter Aimee Mann is known for her hauntingly emotional voice and her thought-provoking lyrics. Here, however, she gives us a little lesson that applies to investing. You see, it’s usually not the things you’re prepared for that hurt you the most. It’s usually the shot you never saw coming that really knocks you out. That’s what happened to many investors in 2008-2009. Fortunately, our readers didn’t get smacked with that knockout punch, as we had warned consistently that the housing bubble was overblown and likely to burst. And while nobody really knew how bad things were going to get, we did know that you always have to be ready for that wealth-destroying punch thrown from seemingly nowhere.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Making Money Alert readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Ask Doug.

In case you missed it, I encourage you to read my e-letter column posted last week on Eagle Daily Investor about how the Chinese market has risen quietly. I also invite you to comment in the space provided below my Eagle Daily Investor commentary.

All the best,

Doug Fabian