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Bad news for those who invested money in the new ETFs

Exactly a month ago they started trading nine ETF o Exchange Trade Fundsafter the National Securities Commission (CNV) issued a resolution that enabled the issuance of the corresponding Cedears.

ETFs are investment funds that are traded on the stock exchange, in the same way as shares, so they can be bought and sold throughout a wheel at the price existing at any given time.

In a way, they are halfway between Mutual Funds (FCI) and stocks. What are they for? Basically to acquire a set of representative assets of a certain stock market index, sector or even countries or regions.

ETFs are mutual funds that are traded on the stock exchange, in the same way that stocks are.

The Cedears that replicate the authorized ETFs are the following:

  • SPY (S&P 500)
  • QQQ (Nasdaq 100)
  • DIA (Dow Jones Industrials)
  • IWM (Russell 2000, that is, companies with a smaller stock market size on Wall Street)
  • EEM (emerging markets)
  • XLF (Financial Sector Stocks)
  • XLE (energy)
  • EWZ (Brazilian shares)
  • ARK (Innovative Companies)

How are ETFs formed?

1. Standard & Poor’s Depositary Receipts Trust Series I (SPY) corresponds to the performance of the S&P 500, which is the main performance benchmark for the US stock market due to its diversity of sectors.

2. Nasdaq – 100 Trust Series I (QQQ) is adjusted to the evolution of the Nasdaq 100 Index, which is made up of the 100 non-financial companies with the highest capitalization and volume of operations.

3. Diamonds Trust Series I (DIA): replicates the performance of The Dow Jones Industrial Average Index, which is made up of 30 large capitalization stocks of blue chip companies corresponding to the main industries.

4. IWM Russell 2000 (IWM); This ETF follows the evolution of the index compound Actions small-cap Americans. It has one of the best portfolio diversifications among small capitalization companies and excellent liquidity.

5. iShares MSCI Emerging Markets Index Fund (EEM) is considered a benchmark for emerging equity markets. Its goal is to capture 85% of the total market capitalization available to the public. Component companies must meet objective criteria for inclusion in the index.

6. The Financial Select Sector SPDR Fund (XLF), like the previous one, is linked to the evolution of the sector of finance of the índice S&P 500. Includes companies that provide diversified financial services; insurance; commercial banks; capital markets; real estate investment trusts; savings and mortgage financing; consumer finance; and real estate management and development.

7. The Energy Select Sector SPDR Fund ETF (XLE) tracks the performance of the Energy sector of the S&P 500 Index, which includes companies that develop and produce crude oil and natural gas, conduct drilling and other energy-related services.

8. iShares MSCI Brazil (EWZ) seeks to replicate variations in the brazilian marketas measured by the MSCI Brazil Index (the Index) compiled by Morgan Stanley Capital International Inc.

9. ARK Innovation ETF (ARKK) invests in Business that are relevant in “disruptive innovation“, defined as the introduction of a new technologically enabled product or service that potentially changes the way the world works.

Investments in ETFs: poor results

Although the market received the announcement and its subsequent launch with marked expectation, one month after its launch, the results are far from what was expected.

Practically all show falls, which in the case of ARKK (innovative companies) reached 17%; followed by the ETF which replicates the Nasdaq (QQQ), with 9.2%. Below were the SPY (S&P 500) which fell 6.1% and the ETC. (Russell 2000) junto al XLF (financial companies) with 5.7 percent. Faced with this general fall, the only one that “remains afloat” is the EEM (Brazilian shares), which climbs 12 percent.

It is clear that these negative paths respond to the turbulence that are affecting the global markets, as a result of inflation that is not giving up in the US as well as in Europe and that is holding at the highest levels of the last 40 years and the worsening of the conflict around Ukraine.

Despite these meager results, the ETFs managed to capture the attention of local investors, since they allow indirect dollarization while being ideal for those seeking greater portfolio diversification.

In fact, in its first month, the amount traded exceeded $18,000 million, with a participation in the total variable income (shares and CEDEARs) above 15 percent. .

As for the investors’ favourites, The ranking is headed by SPY, which accounts for 45% of the total, followed at a distance by DIA and XLF, each with 12%..

ETFs are halfway between Mutual Funds (FCI) and stocks

How did you do throughout 2021?

A brief review of what happened last year for each of these ETFs shows which were the big winners and losers.

From the table it appears that the big winner was the ETF XLE that includes energy companies, since it rose more than 45% in dollars, thanks to the increase in the price of oil at the international level.

In second place is the representative of Financial Services, which advanced by 32.5% and below were the S&P 500, with 23% and the Nasdaq, with almost 21 percent.

With these results, they far exceed the result obtained by the S&P Merval in dollars, calculated on the basis of cash with settlement, which rose 14 percent in the same period.

At the other extreme, the ETF that replicates the iBovespa, which fell 26%, was positioned, while the new technologies fell 40 percent.

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