Introducing Cabot ETF Investing System
Some Things Have To Be Believed To Be Seen
Stock Market Video
In Case You Missed It
Over the years, countless investors have asked us for advice on investing in exchange-traded funds (ETFs). Many have even suggested we start a newsletter devoted to these instruments … there are more than a thousand to choose from.
But we refused because we didn’t have an ETF investing system that could beat the market. And isn’t that the point?
So we searched high and low for the right system and today, I’m pleased to announce that we’ve found it!
Our newest advisory is called Cabot ETF Investing System and its editor is Robin Carpenter, who has decades of experience developing market metrics for investment professionals.
Now, he’ll be heading up Cabot ETF Investing System, which identifies major market sectors favorably positioned to beat the S&P, and then adds a market-timing element (Cabot Tides) to avoid intermediate downtrends. The best news? Back testing of the system revealed average annual returns of about 10% better than the S&P 500 … so it may just be the investing method you’ve been waiting for!
But let’s back up a second. You may be wondering … what is an ETF?
An ETF is an investment fund. ETFs are traded on public stock exchanges like stocks. But unlike individual stocks, ETFs hold dozens and even hundreds of stocks, commodities or bonds, so you get the safety of diversification. In that way, they’re much like mutual funds.
Because ETFs are “unmanaged,” however–you might say they run on autopilot–ETFs entail lower annual fees than comparable index-based mutual funds, and far lower fees than actively managed mutual funds. And instead of pricing once a day after the market closes, like mutual funds, ETFs are traded throughout the day as if they are regular stocks, so you can buy anytime you want and when you buy, you get exactly the price quoted when you buy.
Now, of the more than 1,000 ETFs available, many are designed to mimic the performance of major indexes. You can buy indexes that duplicate the performance of the S&P 500 and the Dow Industrials. You can also buy indexes that mimic lesser-known indexes like the S&P Emerging Markets Small Cap Index and the Dow Jones Small Cap Value Index.
Those are fine for investors who are content to just do as well as the averages.
But if you want to beat the averages, you’ve got to specialize. And for that, the perfect investment vehicles are sector ETFs, which allow you to invest precisely in the economic sectors most likely to bring the biggest gains.
Cabot ETF Investing System uses these nine sector ETFs:
* Basic Materials Select Sector SPDR ETF (XLB): Companies like Monsanto, DuPont and Dow Chemical.
* Consumer Discretionary Select Sector SPDR ETF (XLV): Companies like McDonald’s, Walt Disney and Comcast.
* Consumer Staples Select Sector SPDR ETF (XLP): Companies like Wal-Mart, Proctor & Gamble, Philip Morris and Coca-Cola.
* Energy Select Sector SPDR ETF (XLE): Companies like ExxonMobil, Chevron and ConocoPhillips.
* Financials Select Sector SPDR ETF (XLF): Companies like JPMorgan Chase, Wells Fargo and Bank of America.
* Health Care Select Sector SPDR ETF (XLV): Companies like Pfizer, Johnson & Johnson and Abbott Labs.
* Industrials Select Sector SPDR ETF (XLI): Companies like Boeing, Minnesota Mining & Manufacturing (3M), and United Parcel Service.
* Technology Select Sector SPDR ETF (XLK): Companies like Microsoft, AT&T, IBM and Cisco.
* Utilities Select Sector SPDR ETF (XLU): Companies like Exelon, Southern Co. and Dominion Resources.
Now for this week’s Contrary Opinion Button.
Remember, you can always view all of the buttons by clicking here.
Some Things Have To Be Believed To Be Seen
It’s by Ralph Hodgson, an English poet, and I love it. It reminds me that truth is personal, that a closed mind may not see, and that more truth can be discovered if a mind is prepared to accept it. On the surface, this may sound too philosophical to be of value in the field of investing. However, I think it’s perfectly appropriate, especially as regards keeping an open mind about what might come next.
It also works in regard to the power of charts. Non-believers simply don’t understand their power to reveal the forces at work in the market, while those who understand would sooner invest according to the charts alone than by fundamentals alone.
In this week’s Stock Market Video, Cabot China & Emerging Market Report Editor Paul Goodwin says the major indexes are still trending down, despite the recent rally, so continue to be patient and wait for a technical buy signal. Paul is using his downtime to identify leading stocks for when the trend turns up. Stocks discussed: Salesforce.com (CRM), Athenahealth (ATHN) and Baidu (BIDU).
In case you didn’t get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, there are links below to each issue.
On Monday, Cabot Options Trader Editor Rick Pendergraft explained that during volatile times like we’ve seen over the last few months, options can allow you to keep a good chunk of your portfolio in cash while using smaller trade allocations to take advantage of the swings.
On Tuesday, Dick Davis Digests Editor Chloe Lutts found that surviving a hurricane is not so different from surviving choppy markets, and supplies some hurricane lessons that can be applied to investing. Chloe’s featured stock for stormy markets: iPath S&P 500 VIX Short-Term Futures ETN (VXX).
On Thursday, Cabot Market Letter Editor Mike Cintolo wrote about the reasons investors should sit tight until our market trend indicators turn positive. If you’re determined to invest a small amount, Mike suggests you take a look at his featured stock, Dollar Tree (DLTR).
Until next time,
Editor of Cabot Wealth Advisory
Timothy Lutts heads one of America’s most respected independent investment advisory services. Each week, Tim personally picks the single best stock in his exclusive Cabot Stock of the Week advisory. Build your wealth and reduce your risk with the top stock each week for current market conditionsLearn More