Top ETF Review

for

Investing in Asia

Index Fund Performance for

DBJP, DXJ and CQQQ

Versus Mature and Emerging Markets

A Market Brief

by

Steven Kim

MintKit Investing

www.mintkit.com

Disclaimer This brief is provided as a resource for information and education.The contents reflect personal views and should not be construed asrecommendations to any investor in particular. Each investor has to conductdue diligence and design an agenda tailored to individual circumstances.

2015 MintKit.com

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Summary

A review of the top picks in the exchange traded fund (ETF) category is a prudent

approach to investing in Asia. On the whole, the stock markets in the budding regions of

the world have a way of soaring and plunging far more than their peers in the mature

countries. This hallmark applies to the bourses of Asia as much as anywhere else.

Unfortunately, the emerging regions as a whole have fared a lot worse than the U.S.

market in recent years. Amid the widespread funk, however, Japan and China have turned

into a couple of hotspots on the global stage.

Over the past three years, the best performance was turned in by the MSCI Japan US

Dollar Hedged Index fund, which trades in the U.S. under the ticker symbol of DBJP. The

total return for the dynamo, given by the sum of capital gain plus dividend yield, came out

to an annual gain of 28.15% on average over a 3-year period ending in spring 2015.

During the same timespan, the runner-up was the WisdomTree Japan Hedged Equity ETF.

The index fund, which runs under the banner of DXJ, racked up 26.54% a year on

average.

Meanwhile the third slot was nabbed by the Guggenheim China Technology ETF, which

sports the call sign of CQQQ. The tracking vehicle scored an average gain of 25.92% a

year.

By way of comparison, the flagship fund within the mature economies takes the form of

SPY. The beacon chalked up an advance of 18.11% a year over the same interval.

Meanwhile the heavyweight for the emerging markets lies in VWO, which eked out a mere

4.94% per annum.

From a different slant, a graphic survey of the price action over a longer time frame

provides a wholesome view of the markets. For this purpose, a fitting window is a span of

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half a decade, which is long enough to cover the crash of the stock market in the autumn

of 2011 as well as the recovery in the years to follow.

The visual plot serves to highlight the advantage of SPY in terms of ample growth coupled

with muted risk over the entire stretch. More precisely, the flagship ETF turned in an

admirable showing compared to its rivals in terms of risk-adjusted growth over the course

of half a decade.

* * *

Keywords:

Asia, ETF, Exchange Traded Funds, Index, Fund, Top, Risk, Return, Stocks, Market,

Japan, China, Volatility, DBJP, DXJ, CQQQ. SPY, VWO

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* * *

A review of the top peformers in the field of exchange traded funds paves the way for

investing in Asia. From a larger stance, this type of asset represents a robust and handy

vehicle for gaining exposure to disparate markets ranging from bonds and equities to

currencies and commodities.

Whatever the target domain, the worldly investor ought to start by culling the best

candidates in terms of growth as well as risk. For a balanced view of performance, the

window of evaluation should cover a timespan in which the market has experienced a

boom as well as a bust. The prime candidates can then be compared in terms of the return

on investment tempered by the scope of volatility.

From a pragmatic pose, another crucial issue lies in the level of liquidity required for the

investor to enter and exit the market in a timely fashion. That is, the volume of transactions

should be high enough to enable the nimble player to buy and sell shares without affecting

the price in an adverse fashion by a gross amount.

As a backdrop, the vale of exchange traded funds has enjoyed explosive growth since the

turn of the millennium. Amid the ferment, the landscape abounds with newcomers that

have made their debut only in recent years. In that case, insisting on a lengthy history has

the dour effect of eliminating a lot of entrants from further consideration.

On one hand, a long track record provides a wealth of data for a thorough survey of

performance. On the other hand, the turnout in recent years is likely to pose a better guide

to the prospects going forward than the record of the distant past. Given the mashup of

concerns, a window of three years seems like a fitting compromise between the opposing

factors of plentiful data versus high relevance.

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As with the budding regions of the world in general, the bourses of Asia are wont to thrash

around a lot more than their brethren in America. For this reason, the instability of the

markets in the lusty region plays an even larger role in sizing up an ETF than is the case

for a mature economy such as the U.S.

On the whole, the benchmarks for the emerging nations have been unable to recover fully

from the pounding they received during the financial crisis of 2008 and its aftermath. As a

result, the bulk of the jejune markets have lagged behind the U.S. bourse for years on end.

Despite the poor showing of the nascent countries as a whole, however, there are a few

bright spots within the drab picture. In particular, a number of Asian bourses have

outpaced their rivals elsewhere despite the inevitable chain of setbacks that afflict any

market from time to time. A showcase on the downside cropped up with the smashup of

the emerging regions sparked by the crash of the American bourse in the autumn of 2011.

As we noted earlier, the adept investor has to consider the erratic motion of the vehicles

along the way as well as the overall advance over the entire stretch. For this purpose, a

graphic display of the price action provides an intuitive sense of the turmoil in the

marketplace. Furthermore, a concurrent plot of the vessels serves to highlight their

respective drawcards and drawbacks.

In brief, a meaningful tally of performance requires a track record that covers an ample

timespan. In that case, a period of three years is especially apt for the litter of exchange

traded funds that have come to life of late. The duration represents a tradeoff between the

rich lode of a long history and the close relevance of the recent past.

For a rounded view of performance, however, the window of evaluation ought to cover an

upsurge as well as a smackdown of the market. More precisely, a stretch of half a decade

is enough in our case to cover a crash of the bourse as well as its subsequent recovery.

In profiling the candidates, a graphic scan of the price action can yield a visceral grasp of

the markets. For this reason, a standard tool of the serious investor is a prismatic chart

that lays out the relative performance of the assets under consideration.

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Selection Criteria

As a prelude to investing in any type of asset, the wise investor has to balance the payoff

in due course against the risk along the way. For this purpose, the decision maker has

scant choice but to look in the opposite direction; that is, the experience of the past. In

digesting the historical record, a plain metric lies in the total return on investment by way of

capital gains plus dividend payouts.

A second measure of merit deals with the flightiness of the assets during the swells and

swoons in the marketplace. In this context, an apt yardstick lies in the extent of the price

swings for each entrant in comparison to the stock market at large.

In general, the two types of criteria namely, payoff and wobble are closely intertwined.

An increase in the former usually goes hand in hand with an upturn in the latter. In that

case, the mindful player has to strike a balance between the two traits in light of personal

circumstances ranging from financial moxie to risk tolerance.

Impact of Overhead on Fund Performance

From a different angle, the burden of maintenance fees plays a vital role in the

performance of a communal pool. Other things being equal, a lean vessel that requires

only a small outlay for overhead is wont to outpace a lumbering tub weighed down by a big

load.

In practice, though, the millstone of administrative charges may be ignored in an initial

screening by the busy investor pressed for time. The main reason for giving short shrift to

the expense stems from the fact that the drain of maintenance fees is already reflected in

the overall performance of the index fund.

More precisely, the overhead required to run a communal pool shows up as a reduction in

the level of capital gains, dividend payouts, or both. In this way, the total return on

investment already takes into account the grind of maintenance fees.

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As a result, the overhead can be viewed as a secondary trait in gauging the performance

of the fund. In that case, the maintenance charge may be treated as a tie-breaker in

weighing the prospects for the future amongst two or more candidates of otherwise similar

mettle. To sum up: whatever the payoff might have been in the past, an index fund

hampered by a hefty load is more likely than not to lag behind a rival flaunting a leaner

setup.

In the early stages of the vetting process, then, the savvy investor has more meaty issues

to consider. For this reason, the prober can gloss over the issue of maintenance fees

during the initial phase of sizing up an index fund.

Matchup of Risk and Return

Since the purpose of an investment is to earn a profit, a prospective asset ought to be

fruitful as well as hardy. These generic features apply to tangible goods as well as virtual

wares. An example of the former lies in commodities or real estate, while an instance of

the latter involves currencies or index funds.

In order to pick the best vehicle for a zesty portfolio, the first step is to identify the front-

runners in the derby. In scoring the candidates, the key criteria include the return on

investment along with the volatility in price.

As we noted earlier, the duo of properties are interlinked rather than independent. To wit,

an index fund on a growth streak is prone to be more flighty than a plodding rig in the slow

lane.

In sorting out the entwined traits, a straightforward tack is to begin with the leading vessels

in terms of growth. Then the other factors such as risk and liquidity can be brought to bear

on the appraisal.

Since the eve of the millennium, the field of exchange traded funds has grown at a furious

rate. Along with the upthrow, a host of entrants have shown up only within the past few

years. For this reason, the saplings have little to offer by way of track records.

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On one hand, a large trove of data can serve as the fodder for a comprehensive survey of

the market. On the other hand, an investor who insists on a long history will thereby

exclude scores of fledgling funds.

Given this background, the mindful player has to trade off the amount of data against the

number of candidates. In that case, a track record of three years appears to be a suitable

compromise between the conflicting factors.

Transaction Volume

In picking the best assets for investment, a second constraint involves the liquidity of the

market. A sluggish niche marked by low turnover is a turnoff for the nimble investor who

wants to enter and exit the market in a timely fashion. As a defensive measure, a volume

of 10,000 shares a day seems like a suitable threshold on the low side.

Bane of Leverage

A third restraint concerns the use of leverage, or lack of such. On a positive note, a levered

scheme can snag an outsize gain when the market is on a roll. On the flip side, though, a

high level of gearing results in a crushing loss during the downstroke that duly follows any

upcast.

As a practical matter, the uptake of leverage opens up a can of worms that is anathema to

the genuine investor bent on building up a nest egg over the long haul. The bogeys at

hand include obvious threats as well as obscure snags.

To begin with, a bugbear of modest size involves the usual notion of risk in the financial

forum. The use of leverage gives rise to wild swings to the upside as well as downside.

The thrashing of prices shows up in all time frames, from less than a week to more than a

decade. The manic flailing due to a jacked-up position is a headache that the sober

investor does not need to put up with.

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From a larger stance, though, the spasm of prices is a minor nuisance compared to the

specter of a wipeout. Yet the prospect of utter ruin is ignored by the mass of players in the

marketplace. The careless folks who brush aside the lethal threat run the gamut from

casual amateurs to gung-ho professionals.

For their part, the victims of a blowup rarely manage to recognize the true cause of the

mishap even after the fact. In most cases, the stunned souls walk around in a daze and

chalk up the fiasco to a wanton act of providence. In reality, though, such a knockout is the

inevitable outgrowth of a reckless wager.

For this reason, the embrace of leverage is a suicidal move that ends up in grief sooner or

later. In some cases, the gearing results in the shrinkage of wealth in slow motion. A good

example involves a communal pool in which the operators purchase a series of stock

options in a flaky effort to magnify the impact of a rise in price in the target market.

In practice, however, the bulk of options expire in due course without yielding any kind of

payout to the buyers. More generally, the purchase of turbocharged gizmos is a losing

game for myriads of players in the potlatch of finance.

The foul turnout is a universal fate that befalls all manner of gamesters in the arena. A

common example involves the purchase of call options in order to crank up the returns on

a stock index. Sadly, though, the punters in search of quick profits are headed for the

poorhouse sooner rather than later.

Depending on the context, the operator of a communal fund may opt to take up leverage in

other ways. An example lies in a customized loan from a commercial bank, or a

standardized contract in the futures market. On the bum side, though, the levered ploy is

sure to end up in tears before long.

The threat of a total wipeout is far greater than most people reckon. To underscore the

scope of the problem, we turn to the financial flap of 2008 along with its aftershock. In the

throes of the calamity, every major benchmark of the stock market lost more than half the

value it had reached upon its prior peak.

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In that case, a modicum of leverage by a mere factor of two resulted in the obliteration of

the entire principal from the outset, and then some. In certain fields such as the futures

market, a ramp-up by a factor of 10 is par for the course. Meanwhile other domains such

as currency trading allow the gamblers to take up leverage by a factor of 50, or in some

cases 100 or even higher. As we have seen, though, even a modest amount of gearing is

the path to certain doom.

From a larger stance, a glut of risk is the main cause of the incessant hail of blowups in the

financial tract. A fine example involves the swarm of hedge funds that flit around the

marketplace. In this patch, even the elite outfits namely, the lucky bettors that have

managed to squirm their way into the top tier of heavyweights are destined to fall flat and

die off in droves.

In fact a series of rigorous and impartial studies have shown that the top tier of hedge

funds as a group perform the astounding feat of losing money over time. Moreover, the

shoddy record does not even take into account the shrinkage of capital due to the custom

of profit sharing by the custodians whenever the holdings are carried higher by the

spurious spurts that arise amid the endless squalls in the marketplace (Kim, 2011). To put

things simply, the gross return on investment let alone the net profit trails behind the

performance of a wad of cash stuffed under a mattress.

Given the hazards both blatant and subtle, taking up leverage is an assured way to lose

out over the long range. For this reason, we will exclude any vehicle that resorts to gearing

in a rash attempt to pump up the returns on investment. In other words, the proper gigs for

a sound program of investment rely on the honest tack of tracking the target market in a

forthright way without bulking up on the steroids of leverage.

Benchmarks for ETF Comparison

Whatever the target domain may be, an exchange traded fund happens to be a security

listed on the bourse. For this reason, a sensible move for the canny investor is to compare

any type of equity fund against the performance of the stock market at large.

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In the equity market, the benchmark of choice lies in a yardstick compiled by a financial

advisory named Standard & Poors Corporation, an outfit which also goes by the nickname

of S&P. The yardstick of 500 heavyweights happens to be the most popular proxy amongst

the professionals in the field, be they active practitioners or passive researchers.

The S&P index is a hypothetical construct that represents the average price of the

constituent stocks, after weighting each datum by the relative size of the equitys valuation

on the bourse. The flagship benchmark serves as a virtual yardstick for gauging the status

of the stock market rather than posing as a tangible vehicle for investing any moola.

On the upside, though, the chief index has given rise to pragmatic offerings in the form of

communal pools. The paragon in the field is the exchange traded fund which trades on the

U.S. bourse under the ticker symbol of SPY.

The companies covered by the S&P index are giant concerns in the real economy. Given

the size and hardiness of the constituent firms, the stocks within the benchmark are wont

to be more demure than most of their brethren on the bourse.

As a consequence, the composite index of the big fish also tends to be more sedate than

its lesser rivals in the form of the junior yardsticks trained on the small fry. The samples in

the latter category span the rainbow from technology ventures to emerging markets.

Despite their listing on the U.S. bourse, however, the firms within the S&P benchmark

have been raking in a growing fraction of their profits from the blooming markets of the

world for decades on end. For this reason, the touchstone reflects to some extent the

fortunes of the emerging countries as well.

In line with its usual behavior, SPY turned out to be the least jerky amongst the vehicles

examined here. In particular, the flagship fund in recent years tramped higher at a steady

pace while suffering only a sputter of minor setbacks.

Another beacon for comparison is found in a benchmark of the emerging markets. For this

purpose, a stalwart lies in the Vanguard Emerging Markets fund which trades in the U.S.

under the handle of VWO.

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Unfortunately, the latter fund has turned in a crummy showing in recent years. The lagger

wallowed in the doldrums and made scarcely any progress over the entire stretch of half a

decade.

Top 3 Index Funds for Asia

In the world of communal pools, a venerable resource lies in an information provider

named Morningstar. At the Web site maintained by the market watcher, one feature is a

basic list of exchange traded funds. The rundown of the entrants includes the total return

over the past few years as well as a measure of popularity in terms of the volume of

trading.

Over the course of three years ending in spring 2015, the best score was turned in by the

MSCI Japan US Dollar Hedged Index. The index fund trades in the U.S. under the ticker

symbol of DBJP. The total return, given by the sum of capital gain and dividend yield, came

out to 28.15% per annum.

The goal of the underlying index is to match the performance of the local bourse while

neutralizing the impact of the currency market. That is, the benchmark tracks the stocks

but counters the movements of the Japanese yen against the U.S. dollar. In this way, the

yardstick maintains a hedge against the fluctuations in the value of the local currency vis-

-vis the greenback.

We should note here that the purpose of the countermeasure is to combat the convulsion

of exchange rates. Since the objective is to fend off the risk due to turbulence in the

currency market, the term "hedge" happens to be an upright and valid use of the word.

The usage here stands in stark contrast to a shady practice in the circus of finance, where

the same epithet serves as a euphemism that conveys precisely the opposite meaning.

Behind the seemingly innocent label, a hedged scheme is usually nothing more than a

risky bet.

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The dangers in store for the unwary investor are thrown into sharp relief by the cream of

the crop in the hedge fund game. The custom of the dippy pools is to make waves for a

while by latching onto the latest fad fancied by the madding crowd. When the currents in

the marketplace flip around, as they always do at some point, the rabid speculators lose

gobs of money and bite the dust at the awesome rate of one-half of their number every

couple of years (Kim, 2011).

Meanwhile the full force of the blowout is borne by the hapless clients while the hustlers in

charge of the pools get away scot-free, taking with them the spoils they snatched along the

way in the name of perfomance fees, at times to the tune of billions of dollars a year per

operator. In a flurry of razzmatazz and legerdemain, the cash cows in the form of betting

pools funded by the patrons are thus squeezed and snarfed until they croak.

To return to our main theme, the runner-up in the race during the 3-year span was the

WisdomTree Japan Hedged Equity ETF. The tracking fund trades in the U.S. under the

ticker symbol of DXJ.

The goal of the vehicle is to replicate the performance of the WisdomTree Japan Hedged

Equity Index (WisdomTree, 2015). The underlying yardstick covers a bunch of dividend-

paying firms listed on the Tokyo exchange which draw 20% or more of their revenues from

overseas markets. In this way, the benchmark deals with businesses that boast at least a

modicum of engagement with foreign markets.

As with the previous fund, a notable feature of DXJ is the mission of tracking the Japanese

bourse while squelching the churn of the currency market. That is, the gig hedges against

the prance of the Japanese yen relative to the U.S. dollar. The namesake fund racked up a

gain of 26.54% a year on average.

To move on, the bronze medal was bagged by the Guggenheim China Technology ETF,

which features the byname of CQQQ. The tracking fund seeks to match the performance,

before the cutout of fees and expenses, of the AlphaShares China Technology Index.

The underlying benchmark tracks the stocks of the public companies within the information

technology sector which are based in mainland China as well as Hong Kong and Macau.

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The index fund invests at least 80% of its capital in common stock including the securities

in the form of depositary receipts that trade on the U.S. bourse. The return on investment

for CQQQ was 25.92% a year on average.

By way of comparison, the flagship benchmark in the form of SPY chalked up an advance

of 18.11% a year over the same period. Unfortunately, the corresponding figure for the

emerging markets as embodied by VWO was a meager gain of 4.94% per annum

(Morningstar, 2015).

As we have seen, a numeric score provides a direct and compact way to summarize the

performance of the contestants. On the other hand, a graphic display of the price action

provides the savvy investor with further insights on the fiber of the markets.

Graphic View of Performance

A financial market does not move in a straight line. For this reason, a lucid survey of any

asset has to consider the trajectory over an ample stretch that includes an upthrow as well

as a breakdown of the market.

In the modern era, a watershed cropped up with the financial bust of 2008 and its

aftermath. Given this backdrop, the behavior of motley assets during and after the shocker

provides a telling portrait of performance.

To grok a market of any sort, a good point of departure lies in the price action in graphic

form. Furthermore, a simultaneous plot of the assets in play serves to highlight the relative

merits of the contestants.

In line with these precepts, the chart below has been sourced from Yahoo Finance, the

most popular site for investors. The exhibit spans a window of 5 years ending on 8 May

2015 (uk.finance.yahoo.com).

As the legend on the chart explains, the blue curve depicts the path of VWO throughout

the interval. Moreover, the portion of the image below this line is shaded in light blue.

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The trail of the index fund shows that the emerging markets bounced around over the past

half-decade without making much headway. In the real economy, the budding countries

generate the lions share of growth in the world economy. On the other hand, the paltry

advance of the equity market in the budding regions reflects the jitters of international

investors throughout the entire stretch.

Meanwhile the green arc portrays the course of the SPY fund over the same timespan. On

the left side of the chart, the slump of the tracking fund mirrors the crash of the stock

market as a whole in the autumn of 2011.

The American pacer endured another upset of a milder sort in spring 2012. After that

mishap, though, SPY trudged higher with remarkable consistency. Partly as a result, the

standard bearer chalked up an admirable return of roughly 80% over the entire span of five

years.

Moving on, the purple arc denotes the path of DXJ throughout the interval. The index fund

struggled during the first half of the period covered by the chart above. The initial flailing

was followed by a big spurt starting at the end of 2012 and lasting half a year. After the

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uplift, the tracking fund floundered for more than a year before pressing ahead by a

modest amount over the past year.

The patchy performance of DXJ highlights the import of a graphic view of the price action.

As an example, the jaunty turnout of the index fund over the past 3 years can be explained

in large part by its zippy recovery after a dismal streak over the preceding couple of years.

From a different stance, the equities of technology firms tend to be more flighty than the

bourse as a whole. For this reason, the tech-laden pool in the form of CQQQ faced a

rougher ride than the DXJ fund whose ambit covers diverse sectors of the economy.

As we can see from the tan curve, CQQQ surged for a year at the beginning of the 5-year

span. Then the go-getter broke down and flailed around for a year until the summer of

2012.

After forming a trough, the tech fund powered higher in the years to follow. In due course,

the comeback kid notched up a capital gain in excess of 60% over the entire stretch of half

a decade.

We turn at last to the red squiggle that depicts the path of DBJP following its inception in

June 2011. Since the fund is less than 5 years old, its track record does not span the entire

stretch covered by the chart above. For ease of comparison, though, the trace for DBJP

upon its rollout begins at the same spot on the foregoing display as the mark for VWO on

that date.

For the most part, DBJP moved in sync with its compatriot in the form of DXJ. If the

younger fund had made its debut on the bourse during or before spring 2010, its overall

performance may well have been similar to that of its older rival.

Due to a late start, however, DBJP escaped the whomping that it would have encountered

for about a year beginning in spring 2010 in the same way as DXJ did during that grueling

spell. As we saw in the previous section, however, the youngling did manage to edge out

the elder by a small margin over the last three years.

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In these ways, a graphic spread of the price action can provide a gut feeling for the

marketplace. For this reason, an indispensable tool for the decision maker lies in a

chromatic chart that portrays the relative motion of the assets under consideration over a

judicious timespan.

Roundup of Top Index Funds for Asia

The stock markets in the budding regions have a way of soaring and diving to a greater

extent than their counterparts in the mature countries. This property applies to the bourses

of Asia as much as any other locale.

Where the mature regions are concerned, the role of the S&P index is to track the stocks

of 500 titans listed on the U.S. bourse. The companies within the pantheon are stalwarts of

the real economy. Due to the size and robustness of the firms, their equities tend to be

more demure than the rest of the entries in the stock market.

Given the relative stability of the gigantic stocks covered by the flagship index, the

yardstick as a whole tends to be more restrained than its counterparts in other countries.

Naturally, the same pattern of relative shakiness shows up in the communal pools that

track their respective benchmarks.

In the modern era, the companies within the S&P yardstick earn a growing share of their

profits from the booming markets of the world. For this reason, the chief benchmark

reflects in part the lot of the emerging regions. In other words, the American icon does not

reflect only the goings-on in the U.S. economy.

Based on an eyeball scan of the graphic chart, SPY was clearly the least volatile of the

vehicles examined here. By contrast, the touchstone for the emerging markets in the form

of VWO wallowed in the doldrums and made scarcely any progress over the entire stretch

of half a decade.

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On the other hand, DXJ bounced around a great deal but managed to sprint higher during

the last three years. Meanwhile, CQQQ thrashed around even more then turned in a

rousing performance after the summer of 2012.

On the other hand, DPXJ was a special case due to its bounded history following its rollout

in June 2011. Since its launch, the newcomer moved largely in tune with DXJ but was able

to rack up a slightly better score than its older peer during the last three years.

In summary, there is much to be said for a graphic survey of the price action over a longish

spell as a complement to a numeric tally of performance. For this purpose, a fitting

timespan is a window of half a decade which is long enough to cover the crash of the stock

market in autumn 2011 followed by its recovery in the years to follow.

The graphic display over the longer stretch reveals the advantage of SPY in terms of

ample growth coupled with modest risk during the entire interval. Compared to its frisky

rivals, the flagship ETF turned in a laudable performance in terms of risk-adjusted growth

over the full stretch of half a decade.

Tips and Caveats

A fundamental issue that lies beyond the scope of this report concerns the lack of a

panacea for the investor. Given the absence of a cure-all, each player has to size up the

potential assets in light of their own circumstances.

An example of the latter lies in the level of tolerance for risk. Another sample involves the

way in which a prospective widget serves to complement the other holdings within a given

portfolio.

Amid the diversity of needs and wants amongst investors, the best choice for one person

could well be a lousy pick for someone else. To bring up a counterpoint, a particular player

might decide that a lively rate of growth is not worth the headache brought on by the

severe thresh of prices.

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From a different angle, the heedful investor has to consult multiple sources of information

in order to obtain a robust and rounded view of any asset under consideration. A case in

point is a confirmation of historical data as well as the current status of a communal pool.

Another instance is the long-range outlook for the target market tracked by an index fund.

The field of exchange traded funds is still in its infancy. Due to the callow state of affairs,

the information available on the Web including the data proffered by renowned portals

such as Yahoo Finance is often beset by a raft of flaws. A case in point is a batch of

performance figures which turns out to be incorrect, inconsistent and/or misleading.

Further Information

In sizing up an asset for investment in any field, the prospective gain has to be weighed

against the attendant risk. The key factors for consideration are surveyed in a primer titled

Financial Risk (Mintkit Core, 2015b).

Another resource examines the tradeoff between risk and return in the context of a

practical application. The case study deals with the evaluation of the top 10 exchange

traded funds slated for growth in the global economy (Mintkit Hub, 2011).

In an effort to pump up the returns on investment, myriads of souls turn to managed pools

such as mutual funds and hedge funds. In the aggregate, however, the experience of the

hopefuls has been disappointing and even ruinous.

From a broader view, it makes scant difference whether the investors choose to trade for

their own account or hand over their savings to the professionals: the payoff for the mass

of players has a way of lagging the benchmarks of the market. The crummy turnout

springs from a host of factors ranging from the biased nature of the yardsticks to the

counterproductive moves of the gamesters.

On the upside, though, theres a simple way to surpass the bulk of actors in the stock

market. In fact, the gainful objective is far from daunting or even taxing.

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The name of the game is to earn more by doing less. By turning to an index fund that stays

clear of excess risk including the uptake of leverage, the wily investor can outpace the

competition without breaking a sweat. A primer titled How to Beat the Investment Funds

gives the lowdown on growth and risk for index funds in general and exchange traded

funds in particular (Mintkit Core, 2015c).

To revisit a related topic, the field of exchange traded funds has enjoyed explosive growth

since the eve of the millennium. Amid the pother, the information on the communal pools

can be problematic at times.

To bring up an example, the data may be inconsistent due to the existence of alternative

definitions within the financial community. A hoary sample lies in a measure of risk known

as the Sharpe ratio, which underwent some modification during the second half of the 20th

century (Wikipedia, 2015).

Another source of confusion stems from a dearth of explanation concerning the

terminology bandied about. For instance, the phrase return on investment could refer to

the capital gain for an asset, or the total return given by the sum of the capital gain plus

dividend yield. In that case, an independent confirmation may be the only way to sort out

the ambiguity.

Example of Consistent Data

To bring up a concrete example, we return to the best vehicle identified in this report.

According to Morningstar (2015), the DBJP fund racked up a profit of 28.15% over the

course of 3 years ending on Friday, 8 May 2015.

We can compare the datum against the information given by Yahoo Finance, the most

popular portal amongst the investing public. For this purpose, we will calculate two types of

payoff based on the historical data provided by the Web site.

To begin with, we are told that the closing price of DBJP on 8 May 2012 was $23.50 per

share (Yahoo Finance, 2015a). Three years later, the corresponding value was $43.11.

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Based on the last two figures, we can infer that the price of the stock rose by a mite over

83.4% over the span of three years. In that case, the compound rate of return was 22.4%

a year on average.

On the other hand, what happens if we take into account the stream of dividends thrown

off by the stock? For starters, we know that the actual price of the equity at the end of the

period was $43.11.

The same portal also presents the corresponding price in the past when the payout of

dividends has been considered. Thanks to this feature, we learn that the adjusted price

at the beginning of the timespan after accounting for the dividend stream as well as the

capital gain was equivalent to $20.44 on 8 May 2012.

Based on the last two paragraphs, we infer that the total return amounted to some 110.9%

over the entire stretch. From the latter figure, we deduce that the compound rate of annual

growth came out to 28.2% a year on average.

The latter value happens to be compatible with the figure of 28.15% proclaimed by

Morningstar. Fortunately, the data from the two sources happen to be consistent in this

particular case. Furthermore, we may conclude that the factoid from Morningstar, labeled

simply as the 3-year return, in fact refers to the total return rather than just the capital

gain during the evaluation window of three years.

Showcase of Clashing Information

In line with earlier remarks, the information from one or more sources may be inconsistent.

A case in point is the disparity between the graphic output and the numeric data for the

leading ETF on the bourse over the span of five years.

We begin by noting the value of the SPY fund at the end of the evaluation window.

According to Yahoo Finance, the closing price for the pacesetter on 8 May 2015 was

$211.62.

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As it happens, the same day five years earlier fell on a Saturday. In that case, the

prevailing price at that point was the closing price on the previous day; namely, 7 May

2010. According to the portal, the value of SPY at the end of that trading week was

$111.26. Moreover, the adjusted price of the stock at that point was $100.49 (Yahoo

Finance, 2015b).

In that case, the expansion factor over the entire stretch based on the actual values of the

price level on the bourse is given by $211.62/$111.26; the quotient comes out to 1.902.

That is, the capital gain for SPY over the entire stretch was 90.2%.

By comparison, the total return is given by the terminal price divided by the adjusted price

at the outset; that is, $211.62/$100.49, which amounts to some 2.106. Put another way,

the total return for SPY over the same timespan was 110.6%.

Unhappily, though, neither of the foregoing returns on investment corresponds to the

outcome on the 5-year chart presented earlier in this report. From the graphic image, we

would infer that the payoff for SPY over the 5-year window was around 80%, plus or minus

1 or 2 percent. The latter result differs by a significant amount from the capital gain of

90.2% that we calculated a couple of paragraphs earlier. The gap is of course even bigger

in the case of the total return of 110.6% that we reckoned for the same timespan.

This cameo spotlights the fact that the results from a single portal can be incompatible with

each other. It goes without saying, then, that the problem is even worse when it comes to

the consistency or lack of such of the information supplied by a multiplicity of sources.

One would surmise that the dope would be consistent at least in the case of SPY, the big

kahuna within the entire realm of index funds. Yet even this primo is subject to mishandling

and misrepresentation in the zany world of exchange traded funds.

To recap, the data available on exchange traded funds is often patchy, faulty and/or

misleading. These sinkholes are examined further in an article on Cruddy Information on

Exchange Traded Funds (Mintkit Core, 2015a).

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The same survey provides a battery of defensive moves for the adroit investor. A solid

grasp of the pitfalls and safeguards lays the foundation for building up a robust program of

investment in order to tap into the top markets of Asia or any other region.

References

Kim, S. H. Wildcats of Finance. MintKit Press: MintKit.com, 2011.

http://www.mintkit.com/Wildcats-of-Finance tapped 2015/5/9.

MintKit Core. Cruddy Information on Exchange Traded Funds.

http://www.mintkit.com/cruddy-information-exchange-traded-funds tapped 2015a/5/22.

MintKit Core. Financial Risk. http://www.mintkit.com/risk tapped 2015b/5/22.

MintKit Core. How to Beat the Investment Funds. http://www.mintkit.com/beat-

investment-funds tapped 2015c/5/22.

MintKit Hub. Top 10 ETF List for Growth Performance, Risk and Cost. 2011.

http://w.mintkit.com/2011/02/top-10-etf-list-for-growth-performance.html tapped

2015/5/11.

Morningstar. ETF Returns. Data through 2015/5/8.

http://news.morningstar.com/etf/Lists/ETFReturns.html tapped 2015/5/10.

Yahoo Finance. Deutsche X-trackers MSCI Japan Hedged Eq (DBJP) Historical Prices.

Data from 2012/5/8 to 2015/5/8. http://finance.yahoo.com/q/hp?

s=DBJP&a=04&b=8&c=2012&d=04&e=8&f=2015&g=d tapped 2015a/5/12.

Yahoo Finance. SPDR S&P 500 ETF (SPY) Historical Prices. Data from 2012/5/8 to

2015/5/8. https://uk.finance.yahoo.com/q/hp?

s=SPY&b=7&a=02&c=2010&e=8&d=04&f=2015&g=d tapped 2015b/5/12.

Wikipedia. Sharpe Ratio. http://en.wikipedia.org/wiki/Sharpe_ratio tapped 2015/5/11.

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Selection CriteriaImpact of Overhead on Fund PerformanceMatchup of Risk and ReturnTransaction VolumeBane of Leverage

Benchmarks for ETF ComparisonTop 3 Index Funds for AsiaGraphic View of PerformanceRoundup of Top Index Funds for AsiaTips and CaveatsFurther InformationExample of Consistent DataShowcase of Clashing Information

References