New ETF Tracks Polish Economy

The performance of VNM and RSX, both popular funds with investors, illustrate the importance that sector allocation plays in determining the movement of a fund. VNM, which is up 11.3% for the three-month period ending Nov. 17, has nearly half of its underlying portfolio allocated to the financial sector. RSX, up nearly 150% year to date, has nearly 50% of its underlying portfolio allocated to oil and gas and energy.

Will the new Poland ETF catch on as quickly as Market Vector selections like BRF and RSX? The performance of the fund's largest underlying sectors and costs associated with the fund will help to determine popularity. According to a recent release from Van Eck, the most heavily weighted sectors in PLND's portfolio will be financials, energy and industrials, with 40%, 14% and 11% allocations, respectively.

While Van Eck is touting Poland as the "largest and fastest growing economy in Central and Eastern Europe", it will take more than this country's fast growth to attract investors to the fund. Another emerging-market fund, RSX, can attribute its strong performance to its status as an "energy play." For PLND to succeed, it will need to draw investors who are not only interested in diversifying internationally but who also like the type of sector-specific exposure the fund provides.

Country-specific funds like PLND are helpful in diversifying a broader international portfolio, or in playing short-term trends in international economies. Since they are so narrowly themed, investors have a greater chance of experiencing increased volatility. Because of this, if you add PLND to your portfolio, be sure to keep an eye on it.

-- Written by Don Dion in Williamstown, Mass.

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