As you might expect, the financial sector has the largest weight by a mile at 44.68%. If you look at the PowerShares site you will see it says 35.53% but for some reason the other category is all of the Canadian banks. I'm not sure why it is presented that way but I think it is safe to include banks in the financial grouping.
Both consumer sectors (discretionary and staples), energy, materials and the telecom sectors are weighted similarly in PID as the S+P 500. Tech and the industrial sectors are very underweight compared to the S+P and the utility sector is very overweight at 9.44% (this is not a surprise either).
As for country weightings, Canada is the largest at 22.06%, then the UK at 15.62, Ireland with 6.74% and several others around 5%, including Australia.
As you look at the chart you can see that PID does correlate closely to Canada, the UK and Australia.
PID's correlation to these places is not a shock but it is worth knowing.
That it is so heavy in financials is not, in and of itself a bad thing. Problems can arise if PID is blended together with several other products that own a lot of financial stocks. That sector makes up 20.8% of the S+P 500. With where we are in the economic cycle I would not want to be overweight the sector but this fund shows how easy being overweight can be. If being underweight turns out to be correct, a portfolio that is overweight because of ETF selection will lag and the dividend may not be enough to make up for the lag.
2 comments:
Thank you for your analysis. I own serveral ETF's but always look carefully at their holdings. I think many investors (speculators) are looking at ETF's as a cheap mutual fund. Cheap is not necessarily better, and individual stock selection in my experience has almost always trumped mass groups of securities. Index funds? Well, not for me, but to each his own.
It looks as though there is a serious bid for most of GMAC. Are GMAC Smart Notes a good purchase at this time?
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