This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Should You Buy ETFs of ETFs?

PowerShares just launched three fund-of-funds ETFs, which means they're ETFs that own other ETFs:

The three are:
  • PowerShares Autonomic Growth NFA Global Asset Portfolio (PTO)
  • PowerShares Autonomic Balanced Growth NFA Global Asset Portfolio (PAO)
  • PowerShares Autonomic Balanced NFA Global Asset Portfolio (PCA)

The names are indistinguishable to me but PTO is the most aggressive at 90% equities and 10% other stuff (combo of fixed income, commodities and currencies). PAO is the middle of the road at 75% equities and 25% other. PCA is the most conservative at 60% equities and 40% other.

The three funds own different mixes of essentially the same ETFs (there are a couple of differences), and track indices recently created by New Frontier Advisors. They all target specific allocations which will be reallocated quarterly, but the prospectus allows for more frequent rebalancing to occur if something truly dramatic happens in the markets like, perhaps, a 1987-like crash.

All three funds charge 25 basis points plus the respective fees of each of the underlying funds within.

The equity allocation of all three is very intriguing, because all three favor foreign stocks over domestic; PTO 49% foreign to 41% domestic, PAO 39% to 36% and PCA 31% to 30%.

PowerShares Dynamic Developed International Opportunities Portfolio (PFA) is a favorite of New Frontier Advisers as it constitutes 22% of the aggressive PTO, 15% of the middle of the road PAO and 7% of the conservative PCA. PFA uses a qualitative screening process to sort through foreign stocks to find names that should outperform.

Because New Frontier Advisors' process for inclusion is proprietary, it isn't clear why PFA seems to be such an overwhelming favorite. PFA listed last July and has tracked very closely to iShares MSCI EAFE Fund (EFA). PFA's back test was phenomenal, which perhaps contributed to the decision.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
PAO $0.00 0.00%
EFA $58.68 0.00%
AAPL $95.03 0.21%
FB $116.73 0.00%
GOOG $691.02 0.00%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs