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The ETF Revolution

As a reminder of why we like ETFs so much, consider the following positives. Here are our top five reasons why you should invest using ETFs:

  1. Cost. Investors know that ETFs are cheap. The average cost is an expense ratio of just 0.33%, which is well below the average cost of a mutual fund. Over the course of your lifetime you will save thousands of dollars in management fees by using ETFs vs. mutual funds.
  2. Ease. ETFs are really easy to invest in. It is easy to buy and easy to sell once you know how. Granted, there is a knowledge gap when it comes to buying and selling specific ETFs, but once we show you how you’ll find extremely easy to do.
  3. Simplicity. ETFs are a simple concept. They are index-based. Most investors understand the concept of an index fund. Index investing is both wildly successful and popular, and it’s also much more transparent than mutual fund investing.
  4. Choice. Today there are over 1500 ETF choices. Of course, choice can be a blessing and a cruse. However, with a little knowledge choice becomes a very big advantage.
  5. Access. Access is about more then choices, it’s about being able to invest in places that are not available to mutual fund investors. Some examples would be single country ETFs, or commodities ETFs.

If you have questions about how to use ETFs in your portfolio, email Doug personally with your questions at askdoug(at)dougfabian(dot)com.

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International Market News

Everybody knows there’s some volatility in global events at this time – watch the news for even a few minutes and you can see that. But, from a financial standpoint, we believe that stocks in the emerging markets will continue to outperform the U.S. market for the forseeable future. Right now, we are in a correction mode in the U.S. and we think that this will continue. August is traditionally a tough month for the markets and we don’t see a lot of reasons for the domestic markets to push to new highs. Europe also is not doing very well, and we do not advise exposure to Europe right now.

If you don’t have money in the emerging markets, that is the area that we believe will be growing and presenting opportunities internationally for investors right now. Look at your portfolio – watch for growth and weakness, and keep an eye on those emerging markets, since they are continuing to do well for our investors.

If you want to re-examine your international exposure and make sure that you have the right allocations in the right areas of the world, please call our offices at 800-391-1118 to schedule a complimentary consultation.

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Video Update: Positives in the Emerging Markets

While we are seeing some stress in the domestic U.S. markets, emerging markets are still doing well. We believe that we are coming into a bull market season in Asia right now, and we encourage investors to be alert to opportunities there.

While August is traditionally a slow month in the financial markets, we are seeing some great opportunities in the emerging markets, particularly in China and the rest of Asia. For more information on investing in China through Exchange Traded Funds, please check out our August ETF Snapshot here.

For more complete details on this topic, please watch the full video update here.

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New ETF Snapshot: Top China ETFs

For August, we have highlighted China in our Exchange Traded Fund Snapshot (download it here). The month of July proved to be a real breakout month for Chinese stocks, with the Shanghai Stock Exchange Composite Index surging nearly 7.5%. That’s outstanding on its own, but it is particularly telling considering the S&P 500 sank 1.51% in July.

There currently are more than 30 ETFs that give you exposure to various sub-segments of the Chinese market. This month, we show you the largest China-based ETFs by assets. When choosing an investment vehicle, one important and unique factor to Chinese equities is deciding between ETF exposure to “A-shares” or H-shares. Before the ETF revolution, A-shares were basically available only to domestic Chinese investors. Now, however, both the A-shares and H-shares are available to “foreigners”.

While both types of equities have their particular advantages and disadvantages, the most important thing is to get in on China soon.

Why Consider China?

Investors should consider China-focused ETFs because of valuation, correlation, and technicals.

Valuation:
The most widely followed and liquid A-shares have an average price-to-earnings ratio of about 10. This compares favorably to the S&P 500’s P/E of 18. Even the MSCI Emerging Markets index as a whole trades at a P/E of 17, so with A-shares you get value.

Correlation:
The A-shares have a minimal correlation to the U.S. Market. So theoretically, a correction in the U.S. market should not cause the A-shares to follow suit.  However, over the last decade or so the H-shares do have a about a 70% correlation to the US market.

Technicals:
After spending most of 2014 trading below the 200-day moving average, most of the China equity ETFs highlighted below now have spiked back above their respective long-term moving averages, and some funds now trade at new 52-week highs.

To see which funds made our Top China ETFs list, download it today! If you have questions about how China fits into your portfolio or you would like Doug to take a close look at your allocations, please call our offices at 800-391-1118 for a personal consultation.

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Investment Strategy Update

For our clients, newsletter subscribers and listeners, we thought it would be wise to go over our strategies for investing in portfolios, as it’s midsummer and that’s always a good time to evaluate your investing strategies and goals.

For growth investors:

  • Monitor ticker symbol VT, an exchange traded fund that owns all markets in the world. VT is currently 1% from its 52-week high and gives investors a good view of stocks in the world.
  • In the U.S., the sectors that are doing well are energy, technology and health care.
  • In the rest of the world, we like Asia, Latin America and the emerging markets in general
  • Dividend equities

For fixed-income investors:

  • Closed-end funds (Several ETFs available here: PCEF, YYY for example)
  • Floating rate securities

As always, if you are looking for more investment ideas from Doug and personal advice for your own portfolio strategies, please email Doug directly at askdoug(at)dougfabian(dot)com.

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Video Update: Bond Market Update

Interest rates are still low and it’s pretty amazing that they have continued to go lower. It will be really important to see how the economy responds in the months ahead – we’d actually like to see slightly higher interest rates, because that would mean that the economy is improving.

For more of Doug’s thoughts on the bond market, mutual funds and international equities, watch the full video here.

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Overview of Investing in China

There are now 37 ETFs that are China-focused. (Compare this to only 19 available mutual funds, which are typically much more expensive than ETFs!) Some of these funds are very broad, while some may be strictly sector-focused. ETFs are a great option for investing in China, and it is a steadily climbing area of the world market right now.

We suggest you look at these Exchange Traded Fund ticker symbols in China: FXI and PGJ – just two of 37, but valuable ETFs to glance at and get an idea of the Chinese market.

We suggest that you participate in the up-trend with less overhead and expense and greater options with Exchange Traded Funds instead of Mutual Funds. Next Monday, for the August ETF Snapshot, we will be looking specifically at China and giving more information on why China is a valuable ETF investment at this time.

As always, if you’d like more precise guidance and Doug’s personal take on your portfolio, call our offices today at 800-391-1118 to set up a one-on-one consultation.

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Good News from China

Don’t forget to sign up to see Doug at the San Francisco Money Show! He’ll be giving several presentations on ETF investing and we highly recommend this great show, especially if you’ve never attended before.

As you probably know, we have changed and expanding our newsletter: Successful ETF Investing. If you haven’t seen our new newsletter and you are interested, please send an email to askdoug(at)dougfabian(dot)com with your name and street address, and we will send you a complimentary copy.

A few things to note about the world markets right now:

  • China has broken out
  • U.S. markets seem to be stalling out, but other areas of the world are moving well
  • Japan and Europe are also stalling

Overseas markets have seen a lot of action, particularly in the emerging markets, despite the flat-line in the more established markets, such as the U.S. and Europe. The bond market continues to be strong and interest rates seem to be staying quite low, which is good for bonds. We are seeing big profit growth in the industrial sectors of China, and easing access for Chinese investors and us to buy into the Chinese stock market. Banks over there are improving and we are seeing Wall Street’s negative sentiment toward China begin to turn around.

If you have questions about how to incorporate the emerging markets into your portfolio, or if you simply need a wealth management tune-up, call our offices at 800-391-1118 today.

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Video Update: The Case Against Mutual Funds

For more detail and information, please watch the full video update from Doug Fabian here.

Here are Doug’s main reasons for choosing ETFs instead of Mutual Funds in the “Case Against Mutual Funds”. Mutual Funds are:

  • Too expensive
  • Not tax efficient
  • Not index based
  • Too hard to access
  • Not liquid enough
  • Not innovative enough

For these reasons and more, Doug Fabian and Fabian Wealth Strategies are excited about the opportunities presented in ETFs rather than Mutual Funds. For more information on ETFs and how they can help your portfolio, check out our weekly podcast, here and video update, here.

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Blog Redeux – Investing Advice for Every Decade

A couple of summers ago, we did about a month-long series on investing advice for your 40’s, 50’s, 60’s, 70’s and 80’s. It’s always wise to take some time for personal finances, and we thought that since it is “halftime” in the markets this year, we’d revisit some of Doug’s great personal finance and investing advice again.

Enjoy revisiting these articles and remember – if you have questions or need personalized input on your portfolio, please call our offices today at 800-391-1118.

Investing Advice for Your 40’s

Investing Advice for Your 50’s

Investing Advice for Your 60’s

Investing Advice for Your 70’s

Investing Advice for Your 80’s

Also, don’t forget about our other great investing resources – Doug’s Monday Morning podcast (found here) and our fantastic newsletters at Fabian.com

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