This past week on RealMoney.com, Don Dion blogged about IPO ETFs, Claymore's additional China sector ETFs and Power Shares private equity ETF.
Reduce Risk With IPO ETFPosted 9/29/2009 3:45 p.m. EDT
With seven IPOs, last week marked one of Wall Street's busiest weeks for new entries in quite a while. Companies making appearances included Artio Global Investors (ART), Colony Financial (CLNY), Vitacost.com (VITC) and the highly-sought-after battery company A123 (AONE).
While picking which newcomer firm will be successful can, at times, be like playing roulette, ETF investors have an instrument that reduces this risk.
First Trust U.S. IPO Index (FPX) is designed to track the IPOX-100 U.S. Index. This index is made up of the top 100 U.S. IPOs ranked quarterly. Firms range from large, mature companies such as Philip Morris (PM) to fast-growing and undervalued IPOs.Firms are tracked on this index for their first 1,000 days of trading. The index is adjusted quarterly. Before jumping in, investors should be aware of the risks associated with this instrument. FPX suffers from extremely low volume. The fund's three-month average volume barely breaks 3,000. Additional risk comes with the fund's quarterly rebalancing. With new companies of various sizes and sectors issuing IPOs, the fund's makeup can vary drastically from one rebalancing to another. Year to-date for the period ending Sept. 25, the fund is up 31%.