I don't think the higher volatility numbers will persist. There may be some distortions due to the very thin trading volume.
In assembling a diversified portfolio, having some holdings with the characteristics of dividend-paying stocks makes sense, but I would beware of too much of a good thing. Despite WisdomTree's claim that back testing shows its method outperforms over time, I don't think that betting that dividend weighting will outperform everything else all the time is prudent. While I do want some dividend payers, I also want some holdings that offer the chance for explosive growth. Diversification is blending the two together: dividend payers and fast growers.
Currently WisdomTree is in the process of trying to register 10 sector ETFs and I get the feeling there will be more. Many do-it-yourselfers benefit from relatively predictable, higher-yielding holdings that do not require stock-picking skills. I believe more choice in this area is unambiguously positive.
Why Pay 2 and 20? by James Altucher
Originally published in Columnist Conversation
on Sept. 5 at 8:06 a.m. EDT
I have yet to see a financial product launch as impressive as the launch of WisdomTree's family of actively managed ETFs. Basically, using research from the likes of Wharton professor Jeremy Siegel, WisdomTree has launched ETFs that they feel will outperform the standard ETFs and indices.
While it's still unclear whether or not the premise will hold true for these ETFs (they just launched in June. We will have to wait years to really determine if the strategies are successful), the company has gone all-out in attracting big-name talent to join management and the board, such as hedge fund heavy hitter Michael Steinhardt, Siegel and ex-SEC Chairman Arthur Levitt.
On the one hand, I think WisdomTree is signifying a very broad trend which will last for years and transform the financial industry: People don't need to fork over 2 and 20 fees for hedge funds that are returning LIBOR minus fees. Nor do they need to pay 5% front-end loads plus marketing expenses for high-profile mutual funds. My guess is we will start seeing some of the $10 trillion in mutual funds and hedge funds start to move toward these ETFs, which will inspire other companies to start competitors to WisdomTree.
At a $400 million market cap, it's hard to tell if the pink sheet-listed company is a good or bad investment. If its ETFs can raise $10 billion in the next few years, then certainly an investment today will be considered getting in cheap. The bet is the right bet, but it's still up in the air if WisdomTree is the right horse. That said, I'm impressed with the idea, the marketing and the management, and I plan on taking a further look at the company.
The Game Passes Vanguard By, by Chip Hanlon
In 1896, Stephen Paget, a leading medical expert and author of the then-authoritative
The Surgery of the Chest, famously commented, "Surgery of the heart has probably reached the limits set by Nature to all surgery. No method and no new discovery can overcome the natural difficulties that attend a wound of the heart."
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