Lowdown On Expense Ratios

| April 4, 2014 | 0 Comments

investingLow Expense Ratio.  It sounds good doesn’t it?

It may even be the reason why you got into the ETF trading game in the first place and left the mutual fund market behind.  You aren’t paying high commissions to overpaid brokerage houses and you are avoiding unnecessary fees.  Right?

What if I told you that expense ratios don’t really matter in the entire scheme of things?  When it comes down to it, the overall gains of an ETF are what makes it appealing and not what the direct cost is.

Let’s take a look at three ETFs that are in the top 100 in terms of highest expense ratio, yet are still top performing and show considerable gains over the past year.

UltraPro S&P 500 (UPRO)

UPRO is a top performing ETF with a current price of $102.38. It has shown a 6.59% 1 week return and an amazing 79.79% 1 year return on investment.

The UltraPro S&P 500 index measures the performance of large cap U.S. equities.  It’s not surprising this ETF is doing so well, as the market has been hitting all time highs.

UPRO currently holds 527 stocks of primarily U.S. companies.  It has an annual dividend rate of .06%. It has an expense ratio of .95%.

Sure, this number seems pretty big considering you can go invest in one of those iShares or Vanguard ETFs for a fraction of that cost, but will you be investing in these large American companies with proven financial market success?  Some of these corporations have been around for decades!

For example, Deutsche Bank and Morgan Stanley.  These companies have helped this ETF make these incredible returns.

ProShares Ultra Financials (UYG)

UYG is another top performer that also has one of the highest expense ratios.  With a current price of $132.12, it is up 3.16% just this past week and an impressive 51.31% on a 1-year return!

The ProShares Ultra Financials uses daily investment results, before fees and expenses, that correspond to twice the daily performance of the Dow Jones Index.  With Dow Jones at one of the highest points it’s ever been, there’s no surprise here why this ETF is doing so well.

UYG holds 288 stocks and as expected has a high expense ratio of .95%.  It has an annual dividend yield of .41%.

The majority of UYG’s holdings are in the U.S. financial services and include companies such as Bank of America and Goldman Sachs International.

WCM/BYN Mellon Focused Growth (AADR)

AADR is another top performing ETF with a high expense ratio.  It has a current price of $37.78.  It is up 14.19% over the past year and has a steady return of 23.65% on a 3-year return.

This ETF is not focused on a specific index, instead measuring global equities that include both domestic and international stocks in the technology, health care, industrial, and financial services sector.

It currently holds 30 stocks and has an expense ratio of 1.25% and a dividend payout of .42%.

AADR is currently holding companies like Coca-Cola Enterprises (CCE) and Taiwan Semiconductor Manufacturing Company (TSM).

Here’s the lowdown…

In the end, expense ratios, which surely may have attracted you to ETF investing in the first place, are not the only factor you should consider when choosing an ETF to invest in.

Good Investing,

Corey Williams

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Category: ETFs, Sector ETFs

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets three times a week. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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