• Category: News

Dow and Nasdaq-100 Loose Billions in Funds in Bull Market

In the week ending March 13, the bull market turned six years, seeing the Nasdaq-100 and Dow EFTs registering returns of over 200%. However, the PowerShares ETF and the SPDR Dow Jones Industrial Average ETF witnessed the most outflow compared to any other equity ETFs in the U.S. since the start of the stock bull market in March 2009.


Dow and Nasdaq-100 Loose Billions in Funds in Bull Market

Since March 2009, the Dow has seen net outflows of up to $3.1 billion, while the Nasdaq-100 ETF net outflows amount to about $3.9 billion. The SPDR Gold TF GLD is the only non-leverage exchange traded fund in the U.S. that has witnessed the most amount of money outflow in the last six years. The 28% commodity slump in 2013 and the 1.5% decline that followed in 2014 had an adverse effect on the SPDR Gold ETF.

It is hardly surprising for indices investors that this massive outflow from the Dow and Nasdaq-100 EFT is happening. In recent years, market observers have been critical of the indexes tracked by these particular EFTs, causing many investors to instead gravitate toward other tracking funds.

Eric Balchunas, a senior Bloomberg Intelligence ETF analyst said the Dow ETF “keeps track of a very old index. It is price-weighted and very concentrated; it holds just 30 stocks. Throw in the 30% underperformance of the S&P 500 over the last six years and you can see why investors pulled out some money.”

President of ETF.com, Matt Hougan, contends that the Dow ETF does not give investors a wider exposure to the U.S. stock market as they think it is. So far, the Vanguard Total Stock Market, which holds over 3,000 stocks, is ETF.com’s best pick for complete market exposure.

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Even though the Dow, a blue-chip gauge added Apple Inc. onto its line up for companies to be included in the index, it has not been an important gauge for investors in recent years. In fact, analysts agree that when investors speak about the market, they are actually talking about the S&P 500 or the total global market index.

The PowerShares QQQ ETF is seen as a tech benchmark but market observers such as Davi Nadi, chief investment officer of EFT.com say that the PowerShares QQQ ETF is not an appropriate bet on technology as it comprises of companies that are held on the Nasdaq. Consequently, technology giants such as IBM are excluded even though they appear on the New York Stock Exchange.

Balchunas of Bloomberg Intelligence further added, “QQQ may not have interested investors much due to its odd 60% tech allocation. This makes it a less diverse market ETF and an equally less diverse ETF for the pure tech sector.

The Nasdaq-100, which is tracked by the PowerShares QQQ ETF comprises of the largest 100 non-financial companies on the Nasdaq Exchange.

So far, the Nasdaq-100 ETF’s compilation has performed well overall in the last six years, compared to the S&P 500. A senior equity strategist at Goldman Sachs praised the Nasdaq-100 referring to the present growth opportunity as one that is reasonably priced.



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