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Here Is Your First Smartphone ETF

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Investors might already feel overwhelmed by the dizzying menu of ETF options out there.

In fact, there are now 1,080 ETFs trading in the US, with assets of more than $1 trillion, according to Strategic Insight. These funds offer diverse investment strategies, everything from shorting gold (GLL) to going long on Malaysia (EWM). There are now even 34 “actively” managed ETFs with $2.4 billion in assets.

However, just in case you were on the lookout for one more investment niche to exploit, First Trust Portfolios has the answer: introducing the First Trust Nasdaq CEA Smartphone Index (FONE), which is the first exchange-traded fund devoted just to holding companies involved in smartphone technology.

But will you and your friends really take an interest in such a narrowly focused ETF, particularly when cheaper technology options already abound?

That’s the question Robert Goldsborough, Morningstar’s ETF analyst, asked in a recent research note. He points out that although FONE is the first ETF that is billed as a pure-play smartphone-themed ETF, there are other competitors with similar holdings.

For example, SPDR Morgan Stanley Technology (MTK) owns some of the smartphone-oriented names that FONE holds such as Apple (AAPL), Google (GOOG), and Research in Motion (RIMM). Two other ETFs resembling FONE: the SPDR S&P International Technology Sector (IPK) and the SPDR S&P International Telecommunications Sector (IST).

“Investors should note that MTK, IST, and IPK all charge expense ratios of 0.50% -- significantly less than FONE's 0.70%,” says Goldsborough.
POSITION:  No positions in stocks mentioned.