How ETFs Fared in January

January’s Not-So-Pretty Domestic ETF Picture

The final week of January ushered in a host of corporate earnings reports and, for the most part, those earnings were a mixed bag.

Some big names did well, handily beating Wall Street expectations, such as D.R. Horton (DHI), Boeing (BA) and Apple (AAPL), while other well known names fared poorly, including Caterpillar (CAT), Ford (F) and Procter & Gamble (PG). Still others came in with mixed results, notching higher revenue but a lower-than-anticipated bottom line. The biggest company of this sort was Microsoft (MSFT).

The main reaction to earnings this week was decidedly bearish, as stocks sold off hard, driving the major domestic averages firmly into the red for January, as well as for the year to date.

As of Thursday’s close on Jan. 29, the Dow Jones Industrial Average was down 2.28% year to date, while the S&P 500 was off by 1.83%. The NASDAQ Composite was off 1.11%, while large-cap techs in the NASDAQ 100 were down 1.30%.

The chart here of the PowerShares QQQ Trust (QQQ), the exchange-traded fund (ETF) that mirrors the NASDAQ 100, shows January volatility in the segment.

By contrast, the benchmark international ETF, the iShares MSCI EAFE Index Fund (EFA), is up 2.24% year to date. The chart here illustrates the big price spike in January.

When the year began, I told subscribers to my Successful ETF Investing newsletter that what often happens in markets is that last year’s losers become this year’s winners. (For more on this situation, I address it below in my write-up about “4 Deeper Ways to Be a Better ETF Investor in 2015.”)

So far, we’ve seen this theme operating in domestic stocks vs. international stocks. I am actually of the opinion that international stocks will outperform U.S. stocks in 2015. So, if your portfolio doesn’t have much global equity exposure right now, I think it’s prudent to consider adding some.

If you want advice about specific recommendations on how to take advantage of last year’s losers becoming this year’s winners, check out the Successful ETF Investing newsletter today.

4 Deeper Ways to Be a Better ETF Investor in 2015

During the past three weeks, I’ve offered you suggestions on how to get more from your ETF investing in 2015. This week, I want to finish off our series on deeper ways to be a better investor with a look at the final four techniques to help you succeed with ETFs in the year to come.

1) Check out the top 20. The top 20 ETFs hold 40% of the $2 trillion industry. These are the most successful ETFs in terms of assets, but they also have the lowest fees and some of the best core positions for your portfolio. For the past several weeks, including today, we’ve been doing some detailed editorial on the top 20 ETFs. Because these ETFs are so big in terms of being widely held, it behooves you to make sure you know all about them, as their fate will move the markets. So, even if you don’t own any of the top 20, your money is bound to be affected by their price action.

2) Consider China a key place to invest. China became the world’s largest economy in 2014. It also was the top-performing international stock market, with gains north of 40% in the China A-shares market. China opened its investment markets in 2014 and has implemented major economic and market reforms. And, consider that China’s economy is growing at a rate north of 7%, which actually is considered slow for the behemoth nation. There are now more than 25 ETFs dedicated to China, and these funds represent a key place for investors in 2015. If your portfolio doesn’t have China ETF exposure in it, consider the possibility of a little Chinese diversification.

3) Look at last year’s losers for this year’s winners. More often then not, when the calendar rolls over, last year’s winners tend to morph into next year’s losers — and vice versa. I am looking at energy, commodities, emerging markets and international opportunities as we move into 2015, and that’s because they have been many of the most unloved sectors of 2014. Europe also is an area where we saw some big selling last year. But with the European Central Bank announcing a bigger-than-expected quantitative-easing program of its own, Europe could turn from loser to winner in virtually no time.

4) Join ETFU.com. Finally, if you really want to take your ETF investing to the next level, you simply have to become a charter member of our new educational website, ETF University, or ETFU.com. The mission of this site is to change the way you invest and to enhance your level of investment success using ETFs. Read the stories and special reports, watch the videos and, most importantly, listen to my weekly ETFU.com podcast. The best part about ETFU.com is that it’s all absolutely FREE, and it’s all directed at you, the ETF investor. Hey, if you haven’t checked out ETF University yet, why not go there right now?

Galileo’s Measurements

“Measure what is measurable, and make measurable what is not so.”

–Galileo Galilei

The seminal genius who helped usher in the scientific revolution was all about measuring nature and about making sense of the physical world via reason. When analyzing financial markets, it behooves you to think along the lines of Galileo, as concepts such as sentiment, value, overbought/oversold, etc. all can be measured — provided you have the right tools.

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 Weekly ETF Report 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 from last week about how Europe’s easy money will affect the world. I also invite you to comment in the space provided below.