According to a late December analysis from S&P Capital IQ, three major EFTs could be riskier than you think in 2012. The group gave underweight rankings to First Trust Dow Jones Index Fund (FDN), Rydex S&P MidCap 400 Pure Growth EFT (RFG) and SPDR S&P Oil&Gas Exploration and Production EFT (XOP). The first has been hurt by its ownership stakes in Amazon.com, Juniper Networks and Yahoo! As well as by its relatively high expense ratio of 0.66 percent. Amazon, Juniper and Yahoo all presently have below-average S&P quality rankings. The group considered RFG to have too many overvalued holdings and gave it a poor mark despite a low expense ratio of 0.35 percent, and rated XOP stocks to be overvalued, although it also has an 0.35 percent expense ratio.
On the positive side, the same report indicated that if you’re thinking about investing in the health care or consumer staples sectors, you could be onto a good thing. In fact, these two sectors are the only two within the 10 major categories in the S&P 1200 to deliver positive returns on both price basis and total return basis. However, researchers note, the looming examination of the president’s health care plan could throw a monkey wrench into the entire sector. It is possible – albeit unlikely – that the Supreme Court could throw out the entire piece of legislation, but it is likely that portions of the law will be found unconstitutional. Until more is known about the future of health care law, investing could be tricky.
Where are you investing in 2012? Are you sticking to tried-and-true classics or branching out?
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