In part 1 of our commentary, we discussed the current Fundamental Gravity of our “Slowing Drag...
ETF Expert Eyes India and China
05/16/2014 10:00 am EST
With a track record going back 37 years, Successful Investing is one of the nation's longest-running financial newsletters. Here, Doug Fabian explains why he has added a new portfolio-and a new name-to the leading publication.
Steve Halpern: Joining us today is fund expert Doug Fabian, editor of the industry leading Successful Investing newsletter. How are you doing today, Doug?
Doug Fabian: Doing great, Steven.
Steven Halpern: Thank you for joining us. My introduction there was a bit misleading in that you just announced a name change for your newsletter. Successful Investing has now become Successful ETF Investing. Can you tell us about this decision?
Doug Fabian: Well, I want to say that we had one of the longest running newsletters in the investments business. My dad started publishing our original publication in 1977, and we've been continuously publishing since then 37 years.
We always want to be at the forefront of innovation, and also, we want to be at the forefront of evolution, and we think that there's a lot of innovation and evolution happening in the investment industry right now.
I have been recommending to my subscribers for over ten years the use of Exchange Traded Funds, but I'm kind of sharpening our research and focus in that we will be exclusively following ETFs as we move forward in time and there're a couple of reasons for that.
Number one, it is predicted that over the next ten years, ETFs will surpass mutual funds in terms of assets, and that's a big, big number. Right now, there's $1.7 trillion dollars in ETFs. There are $13 trillion in mutual funds, so that's going to be huge growth in the future if that prediction comes through.
Second, I believe that Exchange Traded Funds offer investors such a better investment vehicle, and I, kind of, coined the phrase "ETF Revolution." I believe that's there's a revolution going on, that ETFs are the equivalent of Smartphones compared to old cell phones, relatively, to their advantages.
There is a knowledge gap for many people in regard to ETFs, but just talking about how investors, number one, can save 70% to 90% in terms of management fees using ETFs versus mutual funds. ETFs are much more transparent, and ETFs give you much better choices relative to all of the investment opportunities in the world today.
Steven Halpern: In addition to the name change, you also added a new portfolio to your newsletter. For our listeners benefit, you previously had portfolios that were focused on growth and on income, while the new portfolio takes a different approach. Can you tell us a little about that?
Doug Fabian: Sure. We added an aggressive growth portfolio. This kind of ties back into my belief that there are just so many advantages out there regarding Exchange Traded Funds that investors need to look at the markets a little bit differently.
I mean, a traditional growth portfolio, of course, was always our focus for the past 37 years. About ten years ago, we added the income portfolio because we had long-term subscribers reach retirement, and they wanted to get an income stream from their investment.
Now I've added the aggressive growth portfolio as a way for our subscribers to be able to take advantage of very specific investing ideas that we uncover in our research that are kind of outside the standard growth and income models, and these investment ideas are going to be more volatile, with higher growth potential.
And so, I set up a separate portfolio for them, and again, subscribers who might even be in the income portfolio might choose to add a little bit of money to a higher growth investment idea that I bring forth to them.|pagebreak|
That's what we're going to be doing with aggressive growth is bringing subscribers ETF investing ideas that we think have short-term growth potential in the 10%-to-20% range over one-to-three months, and you can really get that kind of investment performance from certain sectors within the Exchange Traded Fund industry.
Steven Halpern: Unlike your previous income and growth portfolios, for the new aggressive portfolio you don't plan on giving investors specific allocation to each of the recommendations. Could you explain the reasons behind that decision?
Doug Fabian: The first reason is that I don't want subscribers to feel like they have to be pressured to buy something that's more aggressive to follow my exact asset allocation. I'm giving investors guidelines and we're going to have four to six positions in this portfolio.
It's going to be up to the individual investor to decide what percentage of their portfolio do they want to be more aggressive with, and then they might take advantage of every single idea. They might just take one idea.
Right now, I've got three positions in the aggressive growth portfolio, two positions tied to China, one position tied to India. Let me start with the India recommendation. It's the Market Vectors India Small-Cap Fund (SCIF).
I would think back, if somebody asked me five years ago, "hey, I want to invest in India Small-Cap stock. How do I go about doing that?" I would have told them to go down to LAX, get on a plane, fly to India, open up a brokerage account, and talk to somebody knowledgeable in the area.
Now, you can invest in India Small-Cap stocks with an exchange traded fund and have a fully diversified investment vehicle that's following a specific index. We believe that the India economy has turned.
The small-cap stocks have been underperforming. Matter of fact, this ETF was down over 60% in the past two years. It's just turned around; gone back above its 250-day moving average, and we think it has excellent growth potential going forward.
Our other focus right now is on China. China is suffering from some very bad sentiments, and the Chinese stock market has languished over the last four or five years.
We think that's about to change and that there's going to be a new focus in the next five years on emerging markets once again. Emerging markets go through cycles, just like US stocks go through cycles.
We think we're coming to the end of a US stock up cycle. It doesn't mean stocks fall, just means that they're not going to dominate the world the way they have in the last three years, and we think that China's got some excellent opportunity, and we've chosen to invest in two exchange traded funds in China that are focused on their Internet, their technology, the expansion of their economies.
The first one is the PowerShares Golden Dragon ETF (PGJ). This ETF was up strongly last year, even though the Chinese stock market was down, and we think it's poised for growth again having gone through a recent correction.
And then the other ETF that I'm using right now in aggressive growth is the Guggenheim China Technology ETF (CQQQ), and again, showing the innovation in the world of exchange traded funds, you now are able to invest in a certain sector within the Chinese economy, and this is all going to be about technology.
We think technology's going to show huge growth in China in the months and years to come, so we're quite excited about the addition of the new portfolio, the expansion of the newsletter to 12 pages, and we think that our focus on Exchange Traded Funds is going to benefit investors.
Steven Halpern: We really appreciate you taking the time and joining us today. Thank you.
Doug Fabian: Thank you, Steven. Thank you, very much.
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