Review by hdeakin299
submitted on 09 November 2012
Likes: Cheap : exotic
Dislikes: Small sector limitations
This review only applies to the Vietnam ETF and is not a generic review of all DB X trackers .This Vietnam ETF may appear to be a somewhat exotic choice of investment area to look at and review . My reason for looking at it here is that I have invested recently in it as part of the "flight from Europe" which a lot of investors have had to consider recently.Another reason is that I am trying to "get better" with my understanding of ETFs and how to use them . So as part of a "sandbox" training idea I decided to accept higher frequency of trades so as to be able to rectify mistakes quickly.
Was this a mistake ? At the time I invested in this ETF , a couple of months ago , I was interested in what to do with what I call (with regard to active unit trust funds) the "non indexable" areas. Was there a case for retaining a small percentage in "more expensive" active funds in special areas or could this just as well be done with ETFs or investment trusts?
So decided on a very small play in an exotic area , Vietnam : this ETF had been described in the press so I knew it existed. This is what was said at the time: James Bartholomew wrote in the Daily Telegraph 5 May 2012 :" Which of my investments do I feel most confident about at the moment? Probably my stakes in Vietnam , which are through an investment trust and DB-X Trackers FTSE Vietnam , a tracker fund . "
He continues:" The stock market in Vietnam fell for more than 2 years and now , at last , the downward trend seems to have been broken. Also from what I can discover the underlying shares are good value." And then he writes :" I hear good things about businesses in Vietnam , too , from various sources. But I still find it bizarre to be investing in a place which , when I was young , was a hotbed of Communism."
Yes I agree it is amazing to be able to easily invest there. However today ,after taking seeing small loss and reading some recent press commentary I have decided to review my exceedingly small stake.
This is the detail from the press article in the Daily Telegraph of 7 /07/ 2102 where James Bartholomew writes . " I have sold some of my holding in the DB X Vietnam tracker fund. Someone who knows the country told me that tracker funds have to invest in some of the least attractive companies there because they are big. So an investment trust which can make choices is preferable" . So , for me, that is a very useful bit of information.
As I am , right now , more or less fully invested I cannot make the transition to investment trusts as quickly as I would like. Previously , I had a largely "one dimensional" unit trust based approach and I tried to get away from this by using an ETF . Now however I can now see that Investment Trusts were a better choice for small sectors with limited liquidity : ETFs have a place in larger sectors and economies and I will avoid ETFs in small countries in future : so it is a case of learning how to use all the different collective investments in the right way
I will reuse the Vietnam money to invest in a much larger sector than just Vietnam .At least , for me , it has been educational : it has only been a small loss and it has helped me to define and refine further how I will use ETFs in future.Although there is nothing actually wrong with this ETF I think it is probably too small a sector for the mainstream investor. At the moment there appears to be a lot of these "geographically small" sector ETFs and this is does not necessarily make it easier to a mainstream or novice investor to select the correct product. Luckily more "big sector" ETFs are now available from the likes of Vanguard and UBS and I think I will be using more of these in future.
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