Exchange-traded funds have been all the rage in recent years – they are easy to buy, easy to sell, and often have lower expense ratios than index mutual funds. But the Casey Research team dug deep into the complex world of ETFs and found that in many cases, their names can be utterly deceptive.
Here are a few excerpts of our revealing special report, The Top Ten Misleading ETFs.
Market Vectors Junior Gold Miners (GDXJ) – This ETF sure has a funny definition of a junior mining company. In my opinion, a junior miner is a small, speculative company just getting off the ground. Our publication, Casey International Speculator, specializes in this particular kind of company. If I had to put a number on the market cap, I'd say that junior miners fall under the $500 million mark. If you really want to push the definition to its limits, maybe a market-cap ceiling of $1 billion could still qualify for junior status.
Regardless of the exact line of demarcation, most of us can agree that "junior" means "small." Furthermore, most investors can agree that market caps over a billion dollars are anything but small. A billion isn't a major, but it's clearly in mid-tier territory. That said, the Junior Gold Miners ETF's top 10 holdings are all over a billion dollar or more. The top holding, with 5.23% of assets, even has a market cap of $2.4 billion – that's not exactly a junior, to say the least, and neither are the other companies on the list: Continue reading "ETFs: Do You Really Know What You’re Buying?"