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Monday, December 03, 2012

Don't Judge an ETF by Its Name

News summary by MFWire's editors

Sometimes you can't judge an ETF by its name, according to Karen Damato at the the Wall Street Journal.

Most ETF names seem to straightforwardly describe what the fund invests in, but some can actually be misleading, writes Damato in the WSJ's monthly investing in funds special report.

She cites the existence of such funds, like a "Middle East & Africa" fund that has only five percent of assets in the Middle East. Another "BRIC" fund—which theoretically is supposed to invest in Brazil, Russia, India and China — but really has only two percent of its assets in Russia? There is another product, a "homebuilders" fund, that has only 26 percent of its assets in companies that build homes.

The article cites Robert Goldsborough, an ETF analyst with investment researcher Morningstar as declaring that "a misleading name is a misleading name," and that "the first thing anyone sees about an ETF is the name."

Read more about this development in the Wall Street Journal

Edited by: Tommy Fernandez

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