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ETFs vs Mutual Funds: The Winner Is…

The radically higher number of US equity mutual funds (4,700+) versus ETFs (380+) is not indicative of better stock selection from active management. On the contrary, the vast majority of actively-managed funds do not justify the higher fees they charge. They do not, in terms of stock selection and expected returns, add value versus passively managed benchmarks.
by David Trainer, Founder & CEO
stock rating
2Comments

Stock Rating Methodology

New Constructs assigns a rating to every stock under coverage according to what we believe are the 5 most important criteria for assessing the risk versus reward of stocks. New Con­structs’ stock rat­ings are reg­u­larly fea­tured as among the best by Barron’s.
by David Trainer, Founder & CEO
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Cutting Thru the Smoke in the Energy Sector

Two of the three stocks added to our large/mid cap Most Dangerous stocks list for November are from the energy sector. Those stocks are Energy XXI (Bermuda) Ltd. (EXXI) and Superior Energy Services (SPN) – both get my very dangerous rating as do all of the Most Dangerous stocks. All of the energy sec­tor ETFs get a dan­ger­ous rat­ing, which means you should sell them.
by David Trainer, Founder & CEO
1Comments

Utility Sector: Check The Ingredients Before Buying

High dividend yields are NOT enough to warrant investing in the utilities sector. Too many investors put their hard-earned money in utility stocks with the assumption that relatively high-yielding dividends from stable business make a good investment. The real question that investors in any equity security must ask is: does my expected return from a stock justify the risk of investing in it?
by David Trainer, Founder & CEO
New Constructs
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Total Annual Costs Ratings Methodology for Predictive Fund Rating

Total Annual Costs used to rate a fund's expenses reflects the all-in cost of a minimum investment in each fund assuming a 3-yr holding period, the average holding period for mutual funds. This rating reflects all expenses, loads, fees and transaction costs in a single value that is comparable across all funds. Our goal is to give investors as accurate a measure as possible of the cost of investing in every fund to determine whether this cost of active management is worth paying.
by David Trainer, Founder & CEO
New Constructs
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Asset Allocation Ratings Methodology for Predictive Fund Rating

The Fund Asset Allocation Rating informs investors of each fund's level of allocation to cash (non-equities) as well as how that level compares to other equity mutual funds. We assume investors in equity funds prefer those funds to be maximally invested in equities given that investors can much more cheaply invest in cash on their own. We do not believe that most investors want to pay the high fees associated with equity funds to invest in cash.
by David Trainer, Founder & CEO
4Comments

ETF Shoppers: Accounting Trickery At Its Worst In Financial Sector

There are 25 financial sector ETFs. Per Figure 1, these 25 ETFs have drastically different stock holdings and, therefore, allocations. The lowest number of holdings is 24 while the highest is 496. For starters, investors interested in the financial sector cannot expect many good investment options given that the sector gets my “dangerous” rating and ranks ninth out of the ten sectors that make up the economy. Details are in our sector roadmap report.
by David Trainer, Founder & CEO