The newest ETFs are

• Direxion Daily BRIC 2x Bull (BRIL) (summary)
• Direxion Daily BRIC 2x Bear (BRIS) (summary)
• Direxion Daily India 2x Bull (INDL) (summary)
• Direxion Daily India 2x Bear (INDZ) (summary)
• Direxion Daily Semiconductor 3x Bull (SOXL) (summary)
• Direxion Daily Semiconductor 3x Bear (SOXS) (summary)

For those who haven’t heard the term, BRIC refers to the four largest emerging market nations: Brazil, Russia, India and China.  BRIL and BRIS  provide long and short coverage, respectively, to the BNY Mellon BRIC Select ADR Index with 200% daily leverage.  INDL and INDZ do likewise for the Indus India Index.

These four will be the first Direxion ETFs to offer anything less than 300% daily leverage.  Why they are doing so is unclear.  As we’ve said before, people who want to use leverage typically can’t get enough of it, so we doubt they are doing it for marketing reasons.  More likely some kind of legal or operational constraint prevents Direxion from achieving a 3X daily target in these particular indexes.

The remaining two new ETFs are domestically-focused, specifically on the PHLX Semiconductor Index, often called the SOX.  This index has been a popular tool among options traders for many years, so we suspect SOXL and SOXS will gain a following fairly quickly.  Both the long and inverse versions are leveraged at 3X.

As we always say, everyone should be aware that leverage is reset daily and results over longer periods can vary dramatically.  These are trading vehicles, not long-term investments.  Use with caution.

Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

RBL will compete mainly with Market Vectors Russia (RSX), which until now has been the only way for U.S. investors to get pure Russia exposure in an ETF. Launched in 2007,  RSX has a big head start but SPDR is a formidable marketing machine.  RBL anticipates an expense ratio of 0.59%, only a fraction better than 0.62% for RSX.

As we have pointed out before in regard to Eastern Europe/Russia ETFs, RBL is heavily weighted in energy and materials.  Together those two sectors account for about two-thirds of the index.  The breakdown looks like this, according to SPDR’s RBL Fact Sheet:

• Energy 49.2%
• Materials 17.9%
• Financials 11.7%
• Telecom 8.7%
• Utilities 8.3%
• Consumer Staples 2.7%
• Consumer Discretionary 0.9%
• Health Care 0.4%
• Industrials 0.3%

If this looks lopsided, it is because the Russian market is itself lopsided.  Energy and natural resources dominate the nation’s economy.  Other sectors simply orbit around those two.  In time Russia may become more diversified, but for now it is mainly a bet on a profitable worldwide energy/materials sector.

RBL Overview Page

RBL Prospectus (PDF file)

Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

One niche we like is cloud computing. We’ve previously highlighted the cloud computing trend. We talked about several cloud computing stocks that may help investors profit from the group’s rapid growth. Today we add one more name to that list: Informatica Corp. (INFA). California-based Informatica boasts some strong fundamentals. In the most recent quarter, Informatica reported its profits rose 29% and revenue surged 21%.

Analysts are forecasting earnings growth of 11% in 2010 and 20% in 2011. Those are impressive statistics. According to Investor’s Business Daily, which features Informatica among its top 100 stocks, the number of mutual funds owning Informatica shares rose to 213 from 188 during the last quarter. That’s another positive sign that the smart money crowd is taking note of the stock.

Informatica is taking steps to enter new business segments, highlighted by the company’s January acquisition of Siperian, a master data management company. This was Informatica’s first foray into that space and the company’s biggest acquisition to date. The Siperian buy was greeted warmly by both investors and customers. It makes sense as master data management is one of the fastest growing sub-sectors in the tech space.

Given all of the news, it isn’t surprising to see analysts enthused about Informatica. Just this week Broadpoint AmTech mentioned Informatica as one of its top cloud computing picks. The stock is up more than 15% in the past month and touched a new 52-week high Tuesday on heavy volume.

Whether you call Informatica a growth stock or a momentum stock, the signs are decidedly bullish at this point. Yet the company still has value relative to other tech stocks. For example, the stock trades for nearly five times book value and over 22 times forward earnings. Compare these numbers to Amazon (AMZN), which is trading around 11 times book value and 34 times forward earnings. Informatica looks cheap in comparison.

Regardless of comparisons, Informatica is a strong stock in a strong sector. This means more gains could lie ahead. To play the cloud computing angle with a strong company, go with INFA.

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

All this has an unfortunate effect on some people: we’ve come to expect too much.  We think it’s easy to make it big with questionable investment strategies.  In fact, we’ve convinced ourselves to expect double-digit profits as the norm.  Jason Zweig of the Wall Street Journal aptly summarized most investors’ belief in their market success:

“A nationwide survey last year found that investors expect the U.S. stock market to return an annual average of 13.7% over the next 10 years…in order to earn 6%…after inflation, fees and taxes… investments (must) generate 11% or 13% a year before costs.  Since 1926, according to Ibbotson Associates, U.S. stocks have earned an annual average of 9.8%.  Their long-term, net-net-net return is under 4%.”

According to this data, investor expectations not only far exceed historical market performance, but the perceived risk of those expectations is minimal.  Most investors think they’ll get almost 14% before inflation, fees, and taxes.  If you factor in those pesky return-killers, they expect to keep more like 6%.

History suggests otherwise.  The stock market’s average long-term net is only around 4%, assuming you follow a very aggressive all-stock strategy.  However, considering most investors keep a healthy portion in bonds and cash, the more realistic net return is closer to 2%.  Yet people still think they can make double-digit returns more or less automatically.

Eventually investor optimism runs into market reality.  Averaging a 14% yearly return is tough no matter how brilliant your strategy.  The markets will humble everyone, given enough time.  Furthermore, few people manage to stick with the same strategy for long.  Whatever we resolve to do on January 1^st is usually long forgotten by December 31^st.

The problem isn’t with our intentions or cunning.  The problem is with our expectations.  Making a net return of 6% after inflation, fees, and taxes over a period of years is a massive task for any investor.  This is especially true if you’re managing the money by yourself.  Don’t fall into the trappings of common investor mistakes.

If you use an investment manager and expect these kind of results, you’re putting the manager in a tough position.  Although they may be smart and well informed, it’s nearly impossible to meet such lofty expectations.  Professional managers are not miracle-workers.

The best strategy: keep your expectations grounded in reality.  Don’t fall prey to the dream of unsustainable or ridiculous returns.  Private island or not, success in the market is achievable only if your head isn’t in the clouds.

The three new ETFs are Claymore Wilshire 5000 Total Market ETF (WFVK), Claymore Wilshire 4500 Completion ETF (WXSP), and Claymore Wilshire US REIT ETF (WREI).  If these sound to you like clones of existing ETF products, then you are not alone.  Claymore is marketing them as access to the “pure and complete” indexes from Wilshire.  However, the Wilshire indexes and Dow Jones Total Market indexes are essentially duplicates of each other.

According to an April 2009 press release from Dow Jones, “the Dow Jones Total Stock Market Index family is identical in all aspects to the former Dow Jones Wilshire index family, including methodology, composition and historical data back to 1987.”

To Claymore these new ETFs are pure and complete.  To me, they are redundant and unnecessary “me too” products.  But don’t take my word for it, review the following and decide for yourself:

Claymore Wilshire 5000 Total Market ETF (WFVK) (summary) seeks investment results that correspond to the performance of the Wilshire 5000 Total Market Index.  The fund’s expense ratio is 0.12%.

WFVK will compete with SPDR Dow Jones Total Market (TMW) (overview), which tracks the Dow Jones U.S. Total Stock Market Index, formerly known as the Dow Jones Wilshire 5000 Composite Index, and before that known as the Wilshire 5000.  Prior to April 1^st, 2009, the SPDR Dow Jones Total Market ETF was known as the SPDR DJ Wilshire Total Market ETF.  TMW currently has an expense ratio of 0.21%.

Top holdings and sector allocations of the two ETFs are virtually identical.  WFVK currently has an expense advantage and potentially less tracking error by holding 4,108 stocks instead of the 1,029 of TMW.  TMW has the brand and time in market advantage.

Claymore Wilshire 4500 Completion ETF (WXSP) (summary) seeks investment results that correspond to the Wilshire 4500 Completion Index.  The Wilshire 4500 is composed of the Wilshire 5000 minus the stocks in the S&P 500.  The fund’s expense ratio is 0.18%.

WXSP will compete with Vanguard Extended Market (VXF) (overview), which tracks the Standard & Poor’s Completion Index.  It contains all of the U.S. common stocks regularly traded except those included in the Standard & Poor’s 500 Index.  VXF has a lower expense ratio of 0.15% and holds slightly fewer stocks (3,015 versus 3,518).

Claymore Wilshire US REIT ETF (WREI) (summary) seeks investment results that correspond to the Wilshire US Real Estate Investment Trust Index.  The expense ratio is 0.32%.

WREI will compete with SPDR Dow Jones REIT (RWR) (overview), which tracks the Dow Jones U.S. Select REIT Index.  Prior to April 1st, 2009, the SPDR Dow Jones REIT ETF was known as the SPDR DJ Wilshire REIT ETF.  Both funds hold 82 REITs in nearly identical proportions while RWR has a lower expense ratio of 0.25%.

Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

The year was 1974.  I came from a blue-collar neighborhood where typical incomes were in the $10,000 to $15,000 range.  Anyone making $20,000 was well above-average.  I believed my plan would overcome inflation, and it was based on an extremely conservative income assumption – living off the interest while never touching the principal.

It was a simple plan, but at least I had a plan.  Many people never stop and think about their retirement income until much later in life.  My plan has evolved over the years:  I am no longer content with a $50,000 retirement income, and I am not relying on interest.

Unfortunately for millions of Americans, their plan is similar to my first one:  accumulate a large amount of money and live off the interest.  They worked hard all their life, perhaps paid off their mortgage, grew a sizable nest egg, and are now counting on it to generate income.  Again, this sounds like a reasonable plan, but let’s look at how it is doing.

The two largest retail money market mutual funds are Fidelity Cash Reserves (FDRXX) with assets of $127 billion and Vanguard Prime (VMMXX) with more than $109 billion.  Funds like these are what thousands of investors and savers count on to generate “risk-free” income.

Just three years ago, in 2007, the plan seemed to be working.  These two funds were yielding 5% and kicking out $50,000 a year for every $1,000,000 (one million dollars) invested.  Today the story is different.  According to iMoneyNet, the current yield (as of 3/2/10) on FDRXX is 0.02% and for VMMXX it’s just 0.01%.  Instead of $50,000 in annual income, these two funds are only providing an average of $150 per year.  That is not a typo, and there are no zeroes missing.

What seems at first like a risk-free plan has at least two enormous risks.  The first is interest-rate risk.  The plan assumed 5% and didn’t take into account that interest rates could drop to nearly zero.  A 99.7% decline in interest income is not only possible, it has happened.

The second unmanaged risk is inflation.  If you think it’s hard to live on $150 a year today, just think what it will be like when oil gets back above $100 and health care costs climb even higher than today.  Lower prices for housing, education, and consumer goods are of limited value to retirees, whose expense patterns do not necessarily match the official inflation rates.

The fact is that money market funds are enormously risky if you count on them for income over long periods of time.  Stocks and bonds are risky, too, but in different ways.  That’s why investment management is a key ingredient for long-term success.

You can’t put all your eggs in one basket and then ignore them, even if that basket is cash,   If your plan is still based on living off the interest, or if it has been a while since you last updated your plan, perhaps now is a good time to review the assumptions and see if they are still reasonable.

Disclosure covering writer, editor, and publisher: FDRXX is used by our affiliate, Capital Cities Asset Management, as the cash-sweep fund for many non-taxable accounts.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

One common mistake is not building a portfolio around the investor’s goals. Investment advisors frequently plan based on deterministic financial models. This is a way of calculating a portfolio’s future value by plugging in a desired rate of return along with inflation, taxes, and other simple variables. All the variables remain static through the entire model.

A big problem with this method is whether the assumptions are reasonable. Only a few years ago, many advisors routinely assumed 12% or even higher returns. Second, straight-line modeling doesn’t give an accurate picture of market volatility or risk. Portfolios do not operate like escalators, moving up at a constant rate. Assuming they do is asking for trouble.

About a decade ago some retirement planners, recognizing the inherent flaws in deterministic modeling, started using Monte Carlo simulations. Monte Carlo analysis computes the probability of an event, such as running out of money through one’s retirement, by testing hundreds of possible results. In other words, it looks at a range of scenarios for variables like return or inflation rather than relying on just one.

Monte Carlo simulations were a great leap forward for investment planning, but even these sophisticated models can be used incorrectly. As Richard Fullmer of Russell Investments explains, “The conventional guidance is that investors should plan using a low — 5% to 10% — probability of failure, although the suitable probability threshold for any particular individual will depend on his or her risk tolerance… the problem with this definition and treatment is that the probability of failure is not a complete measure of risk. Just as not measuring risk can be dangerous, so too can mismeasuring it.”

In reality, risk is not only the probability of an event occurring but also the consequences if it does occur. An event with a high probability and a low magnitude may have the same mathematical results as an event with low probability and high magnitude.

Consider Fullmer’s example: Let’s say the fine for a speeding ticket is $100 when the driver’s speed is less than 15 miles per hour over the speeding limit and $1,000 when the driver’s speed is more than 15 miles over the limit. Now say you are driving on a road where the posted speed limit is 50 miles per hour. ‘Clearly, the risk to you of driving 67 miles per hour on this road is much greater than the risk of driving 63 miles an hour.’

Does this mean Monte Carlo analysis is as worthless as the old straight-line model planning? Not at all, it’s still a wonderful tool as long as the assumptions are grounded in reality. Monte Carlo analysis is not a complete process. A good advisor will also lead clients through a serious discussion of risk and the magnitude of that risk.

Monte Carlo Analysis is a tool; it’s not the only factor in designing your portfolio. Your personality, goals and risk profile should ultimately drive your retirement plan. The analysis shouldn’t be driving you. If your planner/advisor isn’t helping you understand the difference, it may be time to shop for a new one.

If you are currently interested in finding out more about investment management, a great place to start is with our affiliate Capital Cities Asset Management. You can contact them at (800) 767-2595 to discuss your needs or to schedule a free investment consultation.

The quick answer is “No.” The process of securitizing gold – as with any other asset – depends on the integrity and cooperation of numerous parties. The chain can fall apart at any point if someone is dishonest or incompetent. Assorted safeguards exist to reduce this possibility, but they are not foolproof. This applies not only with PHYS but also products like SPDR Gold Trust (GLD), iShares Comex Gold Trust (IAU), and ETFS Physical Swiss Gold Shares (SGOL).

That being the case, investors who demand assurance they really own physical gold stored in their name in a secure place should probably not buy any of these gold-related securities. All are nothing more than book entries and pieces of paper that claim to represent the ownership of gold. If you don’t trust whoever is making this claim, don’t do business with them. Buy a good safe and keep your gold at home.

Storing gold in your house isn’t risk-free either, of course. Burglary and robbery are always possible. You also won’t be able to buy and sell instantly, and your transaction costs will likely be higher than they are in the securities markets. It would be nice to have our cake and eat it too, but I don’t see how.

So I throw out a question to you: How do we square this circle? What do you want to see in an exchange-traded gold product? What could sponsors like Sprott, ETFS, iShares, or SPDR do to meet your needs?

Keep in mind there will always be trade-offs between expenses, liquidity, and security. The possibilities are also limited to what is legal. Maybe the law ought to be different – and would be different if guys like Ron Paul were in charge – but that’s a separate question. We have to play with the cards we are dealt. Add your ideas in the comments and maybe someone who can do something about it will pay attention.

Disclosure covering writer, editor, and publisher: Long GLD. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

Of the BRIC nations, Russia has the fewest ADRs trading on U.S. exchanges and just one ETF. Furthermore, Russia is mostly a play on oil and natural gas prices, making diversification difficult. But what about India? Despite the fact that India is the world’s largest democracy and the third-largest Asian economy behind Japan and China, the “I” in BRIC is often forgotten by U.S. investors. Yet this fast-growing market offers plenty of opportunity.

We’ve discussed investing in India before, and now we are looking at the subcontinent again. Investors have plenty of choices when investing in India from the U.S., with many ADRs and several ETFs and ETNs now available. We like WisdomTree India Earnings ETF (EPI). On the surface, EPI offers at least one primary advantage over other ETFs: liquidity. EPI easily tops several other India products in average trading volume with more than one million shares changing hands on a given day. Thus far in 2010, EPI has also outperformed two of its chief rivals, PowerShares India ETF (PIN) and iShares S&P India Nifty 50 Index (INDY).

Those are nice anecdotes. But what you really need to know about India is the long-term growth story. Indian officials recently met with Saudi Arabia in an effort to increase oil shipments. When a country needs more oil, it is usually a sign that the manufacturing sector is growing and needs energy resources. Some estimates show that India’s GDP is expected to grow by 14% annually in 2014, and by 2025 the country may have a larger economy than the U.S.

One drawback to EPI may be a lack of sector diversification. Industrial materials and financial services names account for 52% of the portfolio. That said, EPI has moved above its 50-day moving average. If it can clear its January peak of $23.65, a run to the high 20s is possible.

EPI has an expense ratio of 0.88% and currently over $720 million in assets. We also like how it recently broke out of congestion and could be on the verge of a healthy uptrend. Overall, EPI probably ranks high on the list of India ETFs currently available to U.S. investors. To buy into India’s growth story, go with EPI.

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.

DIA Name Change: After the close on February 26, DIAMONDS Trust (DIA) became SPDR Dow Jones Industrial Average ETF Trust (DIA).  The ticker is unchanged but there is a new CUSIP.  For more information please refer to the press release.

SPY & MDY Name Changes: The two oldest US-listed ETFs underwent name changes back on January 27.  The SPDR Trust (SPY) is now the SPDR S&P 500 ETF Trust (SPY), and the MidCap SPDR Trust (MDY) is now the SPDR S&P MidCap 400 ETF Trust (MDY).  More information can be found in the press release.

Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.