Three ETFs That Might Add Balance to Your Portfolio
Natalie is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The top three ETF movers to watch for are Market Vectors Vietnam (NYSEMKT: VNM), which is up 5.9%, Market Vectors Brazil Small Cap ETF (NYSEMKT: BRF) up 3.4% and United States Brent Oil Fund (NYSEMKT: BNO) up 2.9% during the last week. Although moving higher, these ETF’s might make a good addition to your portfolio, as the upside looks good for each. I am looking at these three ETFs to find out why each is moving higher, while also suggesting a way to invest in ETFs with your portfolio of equity investments.
An increase in manufacturing takes ETFs higher
In the last month Vietnam’s PMI has increased, from being 49.3 in December to 50.1 as of January. Manufacturer reports show lower levels of new work from the EU and China, due to a decrease in export orders: thanks to overseas demand. Though Market Vectors Vietnam has had some low points, it’s up 18.9% YTD; this of course will lead to greater foreign ownership of shares, since they have had a series of rate cuts. With it underperforming other ETFs in 2012, this might be one to buy or follow in 2013 if in deed production continues to rise.
Brazil’s PMI has also been on the rise since December, going from 51.1% to 53.2%. Due to this rise, Market Vectors Brazil Small-Cap ETF has seen a boost, being the second best performing ETF of the week. Brazil’s PMI has been on a 23 month high due to strong gains in Production. Though Brazil has had strong numbers for such a long period of time, they may still be vulnerable because of uncertainty with electricity supply. Therefore, I’d be careful with this one, and may seek large cap ETFs in favor of small-cap ETFs, as they would see the greatest impact from an increase in PMI.
Oil on the rise despite OPEC limitations
Oil prices are always volatile, but as of now The United States Brent Oil ETF is up 2.9%. Studies have suggested that OPEC has less power to maintain high oil prices, which prevents them from being able to offer lower oil prices. As of now they seem to be content with the oil priced at $110/bbl, which might create some outrage among consumers. While investing in oil is always a safe bet in the energy ETF space, it might be wise to diversify your portfolio with a number of clean energy or alternative energy ETFs to provide security. As the country continues to emphasize a change in energy policy we might see a drop in Brent over a course of time.
The U.S. equity markets are valued around all-time highs and there has been a recent shift in favor towards these equity investments. Last month we saw a record inflow into the stock market so some have insinuated that ETFs might not be a good place to invest. My suggestion is to hedge your long equity investments with a variety of ETFs for better protection and diversification. These are often better than bonds or other investments, and give you a larger exposure to a particular sector in the marketplace, both local and globally.
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