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Dion's Weekly ETF Blog Wrap

Find out what Don Dion was blogging about this past week on <I>RealMoney</I>.
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NEW YORK (

TheStreet

) -- Don Dion posts his current insights on the stock, bond, commodity and currency markets in his

RealMoney

blog, anticipating which ETFs will be in play next.

Here are three of his blog posts from the past week:

Rare Earth Metal ETF Goes Gangbusters

Published 10/28/2010 3:18 p.m. EDT

Hard assets are an easy sell. Just ask Van Eck, which launched the

Market Vectors Rare Earth/Strategic Metals ETF

(REMX) - Get VanEck Rare Earth/Strategic Metals ETF Report

to a stunning investor response today: By midday, more than 1.5 million shares had already crossed the tape.

Why "rare earth" metals? Two reasons seem to immediately stand out. First, the commodities craze is an unstoppable force in the ETF industry right now, and otherwise wary investors seem to not mind wading into equities as long as they're hard-asset-related. REMX's underlying portfolio consists of firms that are engaged in a variety of activities related to mining, refining and manufacturing rare earth metals.

Second, VanEck understands "first mover advantage" arguably better than any other ETF issuer today. Rather than launching a raft of predictable broad-index and copycat funds (a la

Vanguard

), the Market Vectors slim suite of ETFs consists of exotic picks such as the

Market Vectors Indonesia ETF

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and narrowly themed funds such as the

Market Vectors Junior Gold Miners ETF

(GDXJ) - Get VanEck Junior Gold Miners ETF Report

. By beating other, larger, ETF issuers to the punch, Market Vectors has carved out its own unique niche in an increasingly crowded market.

> > Bull or Bear? Vote in Our Poll

So is REMX worth a look? It's certainly a compelling concept. The firms at the heart of REMX's lineup are benefiting both from soaring commodities prices as well as the need for rare earth materials in everything from flat screens to cell phones to jet engines.

Is all the hype for these materials (and REMX) deserved, or is the fund simply overbought? While I like REMX as a long-term holding in a well-balanced portfolio, I would hold off on buying shares for a couple months.

Rare earth metals have been pushed to the forefront of investor attention. China, the main global producer of rare earth metals, announced that it is implementing a reduction in its export quota. Prices have soared, and China has reportedly suggested that it might halt exports of these metals in order to help companies within its own borders.

I think that the China story might not play out as anticipated and that rare earth metals will fade from the headlines in the next couple months. While this doesn't diminish the importance of rare earth metals as a long-term play, it does mean that the concept of rare earth metal investing might be over-hyped in the short term.

If the obsession with rare earth metals diminishes, REMX's liquidity could dry up as investors move on to the next big story. If you truly are bullish on rare earth metals as a long-term play, it's worth waiting to see if prices back off in a few weeks and if enough investors remain interested in REMX over time to make this new fund viable.

At the time of publication, Dion Money Management had no positions in stocks and ETFs mentioned.

Heed Broadcom's Signal on Semi Strength

Published 10/27/2010 12:58 p.m. EDT

Broadcom's

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stellar third-quarter earnings report may be getting lost in the shuffle when it comes to economic news today, but investors should certainly tune in to this signal about the strength of the semiconductor industry.

Despite a swift slide in broader equity action today, the

iShares PHLX SOX Semiconductor Sector Index Fund

(SOXX) - Get iShares Semiconductor ETF Report

is a standout in positive territory today as Broadcom's results help to buoy the sector. Broadcom, which makes up nearly 9% of SOXX's underlying portfolio, posted a four-fold jump in profit after the bell yesterday.

Broadcom's strength serves to underscore a broader improvement in the sector, which has advanced in recent trading sessions. SOXX tracks top names in the semiconductor industry, such as

Texas Instruments

(TXN) - Get Texas Instruments Incorporated Report

,

Applied Materials

(AMAT) - Get Applied Materials, Inc. Report

, Broadcom and

Intel

(INTC) - Get Intel Corporation Report

, which managed to maintain normal inventory levels even during the economic pullback.

SOXX is a good way for investors to gain exposure to semis at this point in the economic recovery. Broadcom, a bellwether of the semi industry, has adjusted its revenue outlook higher as products such as

Apple's

(AAPL) - Get Apple Inc. Report

iPad continue to demand cutting edge technology and connectivity. SOXX is a solid one-stop-shop for exposure to this advancing tech group.

At the time of publication, Dion Money Management had no positions in stocks and ETFs mentioned.

A Golden Entry Point

Published 10/26/2010 12:30 p.m. EDT

The pullback in gold prices today presents a compelling opportunity for investors who have been looking for an entry point. Though a small upswing in consumer confidence and overwhelmingly positive earnings results have restored some faith in stocks, concerns certainly remain.

The upcoming election (and policy concerns), currency concerns and a desire to hedge against economic downswings should all help to send gold higher in the medium-term. Investors should use short-term pauses, such as today's, to gain exposure to the physical metal.

When adding gold to hedge against inflation or to round out an equity-heavy portfolio, investors should stick with physically backed funds like

SPDR Gold Shares

(GLD) - Get SPDR Gold Shares Report

or

iShares Comex Gold

(IAU) - Get iShares Gold Trust Report

as opposed to equity-backed picks such as the

Market Vectors Gold Miners

(GDX) - Get VanEck Gold Miners ETF Report

. A day like today presents a good opportunity to build in a fund such as GLD for long-term exposure (not a short-term play on a price swing).

Gold keeps breaking records and making headlines, but those aren't the only reasons to add a physically backed fund to your portfolio. The goal of every investor over the medium to long term should be to build a well-rounded portfolio that can withstand a variety of market conditions.

Stocks, bonds and hard assets are all important parts of this mix. In the short term, investors need to keep an eye out for opportunities to make these kinds of long-term moves (towards balanced asset allocation). Gold's pullback today presents a solid opportunity to take a longer-term stake in this precious metal.

At the time of publication, Dion Money Management was long IAU.

A special note from Don: Put simply, I want to help you profit from ETFs.

You don't have to be an expert trader -- there are potential profits for investors at every level. And I think there's no better way to jump into the world of ETFs than through my brand-new service,

TheStreet ETF Action by Don Dion

.

Membership is limited, so click here to get in on the action!

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Don Dion is president and founder of

Dion Money Management

, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.