Banks top ten

Forgot to post the top ten holdings of KBE and their total composition of the ETF.  As you can see, they are banks.

C	Citigroup Inc	10.63%
JPM	JPMorgan Chase & Co	8.36%
BAC	Bank of America Corp	6.92%
WFC	Wells Fargo & Company	6.74%
USB	US Bancorp (Del)	6.10%
RF	Regions Financial Corp	4.93%
STI	Suntrust Banks Incorporated	4.59%
FITB	Fifth Third Bancorp	4.52%
MTB	M&t Bank Corp	4.38%
HBAN	Huntington Bancshares Incorporated	4.35%

Banks

Everyone knows about the financial crisis that hit America’s banks.  A perfect storm of bad mortgages and off balance sheet transactions nearly sent America’s economy into chaos.  Luckily for us investors,  the banks got bailed out by Uncle Sam.  Lehman Brothers, more of a broker-dealer than a bank, went down.  Other than Lehman, no banks were allowed to fail, because that would mean economic economic failure.  Today, foreclosures have skyrocketed and the fast, efficient world of finance is colliding with the slow moving judicial process that must guarantee due process.  Bank stocks are taking a hit because of this.  Citi Group is trading at $4.11, Bank of America is trading at $11.44.  People are ditching bank stocks because the near future does not look very promising.  But like Warren Buffet says be fearless when everyone else is scared and be scared when everyone else is fearless.  Short term banks do not look that great, but the recession will end banking will resume as normal and banks will be back to their old profitable selfs.  

So where is the investment here? An ETF of course.  KBE is the SPDR KBW BANK ETF and allows you to make a straight bullish bet on the banking sector.  Yes the banking sector has taken a big hit but it will bounce back in the long run and Uncle Sam will not let it fail.  I have attached the charts of KBE, Citi Group (C) and Bank of America (BAC) to show where there prices currently are.  Sure they are low, but get in now while they are cheap.  Out. 

Who Am I?

I forgot to introduce myself and explain why I am doing this.  Corporate Finance is my profession and investing is my hobby.  I graduated with an undergraduate degree in Finance and have started my first job.  Money has never been plentiful but now that I am working I have a few extra dollars to invest.  I was already doing research on my own investments and decided why not publish my research and investing ideas.  Investing is not my profession but I am following my own advice posted on this blog.  You should always do your own due diligence on investments but I think these are great ideas that will profit in the long run.  Please follow along.  

Brazil Baby

I HAVE A TWITTER ACCOUNT: ETFplayer, follow me to know when I add new posts.  My goal is 3-4 per week.  Now for the post.

I am very high on Brazil.  A little quick history on the country:

Two decades ago Brazil was plagues by inflation, debt and gross inequality.  Today it is a top ten world economy, has achieved energy independence and is an agricultural superpower.  They are the host of the 2014 Soccer World Cup and the 2016 Olympics.  

-Side note:  South Africa, who hosted the 2010 World Cup is expecting GDP Growth of 9 plus % this year and next.  I think Brazil can do that and more, they also have the additional Olympic Games benefit.   

From 1995-2002 Fernando Henrique Cardoso was President of Brazil.  He was able to control inflation through a stabilization plan and opened the way to turning formerly impoverished Brazilians into consumers.  Since taking office in January 2003, Luiz Inacio da Silva has followed the broad policies established during Cardoso’s presidency.      He also aggressively expanded many social programs improving the quality of life of its inhabitants.

New Brazilian elections will take place on October 31.  Lula’s likely successor is Dilma Rousseff, candidate from Lula’s Worker’s Party.  Rouseff is a strong women who has survived breast cancer.  She looks to continue the economic and social policies of Lula and to expand Brazil’s hydroelectric power production.

So here is the big question?  How do you invest in Brazil to benefit from all the exciting things taking place there?  ETFS BABY!

I recommend EWZ: IShares MSCI Brazil Index Fund.  It is trading at around $80.00 and holds $10.4B in assets and an expense ration of 0.65%.  Look for this fund to take off as  Brazil continues its economic rise.  It looks to provide investment results that correspond generally to the price and yield performance of publicly traded securities in the Brazilian market.  Its top ten holdings includes Petrobas, the giant state owned oil company, and Itau Unibanco, the largest bank in Brazil.  Don’t miss out on the gains that this fund will yield in the coming years.  Tweet at me with your comments or post them on the blog.  Out.

ETF intro

Are you someone who has some extra money to invest?  Do you have a hunch about where a particular industry or market is going to go?  Then this blog is for you. 

This post will explain what an ETF is an why you should be invested in them.  The rest of my posts will be dedicated to diagnosing the current markets and recommending ETFs that will help you make money in current market conditions.  ETFs are essentially mutual funds that trade on an exchange.  The ETF owns a basket of stocks, and when those stocks appreciate in value, the ETF itself appreciates.  

An ETFs underlying net asset value is calculated by taking the current value of the fund’s net assets divided by the total number of shares outstanding, and is published every 15 seconds throughout the day.  Because the funds trade on an exchange price is determined by supply and demand, that is why the ETF’s market price can differ from its net asset value.  The way ETFs are structured helps keep the gap between the two pretty small. 

ETFs offer tremendous benefits to the investor.

 -They have lower expenses and fees compared to traditional mutual funds:

This is because most of the funds are passively managed to follow a particular index, unlike mutual funds which are actively managed.  Also many ETFs trade for free when you are using an online broker, which is awesome.  

The average ETF expense ratio is 0.44% while the average index fund costs 0.74%, everyone loves paying less.

-ETFs are very tax friendly:

The manager of the fund doesn’t need to constantly buy and sell stocks, as with any index fund.  The special way that ETFs are structured allows them to be more tax-efficient than traditional index funds.

-Diversification:

ETS provide an efficient way to invest in a specific part of the stock or bond market.  For example, Small cap US stocks, Energy companies, Emerging market bonds, THE POSSIBILITIES ARE ENDLESS.  You can play all sorts of markets with ETFs.  

-User-Friendliness:

ETFs can be bought or sold at any time during the day, just like stocks.  Mutual funds, on the other hand, are priced only once at the end of each trading day.  Some ETFs  do require brokerage fees for every trade, typically around $8.00.  But some ETFs do trade for free which once again is really awesome.

Hopefully this post helps you understand what an ETF is and why you should be invested in them.  The rest of my posts will be suggestions on how to use ETFs to make money in current market conditions.