By Request

Over the weekend T asked for my take on the iShares foreign dividend fund IDV and the First Trust Global Dividend ETF (FGD). In this post I look at IDV and I think I am going to do a write up for TheStreet.com on FGD.

The chart compares IDV to similar funds from PowerShares (PID) and WisdomTree (DTH).

IDV has lagged substantially since inception. The lag, I believe is attributable to a couple of things. It has the heaviest weighting to financials at 41.74% compared to 38.53% for PID and 40.76% for DTH. The difference may not seem to be that much but PID has 10.41% in the big Canadian banks which, luckily for me, has been a good place to have financial exposure during the crunch. The differentiator for DTH has been its 11.56% in energy compared to just 2.09% in energy for IDV.

At some point the financials will obviously provide leadership and at that time (whenever that comes) IDV will probably lead the way up. Some might want to game that sort of thing but that is not my type of trade.

From a diversification standpoint I think IDV is the worst of the three but between PID and DTH I am not sure which is better. DTH excludes Canada as a function of methodology while PID has 20.56% in Canada (according to ETFconnect).

Depending on how PID might be used in a portfolio someone might end up with too much Canada. I have owned one of the banks across the board for quite a while now and have had more exposure in the past (reduced it earlier this year) for some clients. You may have heard they lowered their overnight rate yesterday, and the loonie has given back some of its recent gains. The greenback being too weak is problematic for them and while I have no plans to sell the one bank I would not want too large of a position right now. Also if oil has its usual winter swoon (started a little early this year?) that too could work against Canada and for now I have been trying to reduce volatility for clients.

Trying to look forward for DTH you could take the above paragraph and replace Canada with Great Britain and the 27.88% it has in DTH. Fears of a slow down are gaining traction and so too much GB could also be the wrong place to be. I have a couple of UK stocks as across the board holdings including a bank and some clients own a two year piece of sovereign debt as well.

There have been calls for the pound to generally weaken but I do not think it will weaken against the dollar as a standout unless the dollar surprises everyone and rallies against everything in 2008 which is a possibility. Do not take that as a fundamental opinion but just my being ready for the dollar to rally at exactly the time it shouldn't.

All of the above should illustrate the problems potentially faced with broad-based funds--I do view them as broad-based. I do own PID for a couple of accounts where as a function of circumstance it makes sense but the types of overweights and underweights described above to need to be accounted for, IMO, if they are going to be used.