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YOUR MONEY-Looking For Holiday Buys? Try E-commerce ETFs 

Mon 25th November, 2019 11:00am
(The writer is a Reuters contributor. The opinions expressed
are his own.)
    By Chris Taylor
    NEW YORK, Nov 25 (Reuters) - First the bad news for your
wallet: Americans are slated to spend more than they ever have
this holiday season - around $730 billion in November and
December, according to the National Retail Federation. 
    Online shopping alone is expected to amount to $143.7
billion over the last two months of the year, a 14.1% increase
over last year, according to projections by Adobe Analytics.
    Now the good news: There is money to be made on the other
side of that trade. 
    E-commerce exchange-traded funds are set up to capitalize on
all those online transactions by gathering a bucket of stocks of
companies like Amazon  AMZN.O , eBay  EBAY.O  and PayPal
 PYPL.O  and selling shares of them as a specialized ETF.
    Top players include First Trust Dow Jones Internet Index
 FDN.P , Global X E-commerce  EBIZ.O , Amplify Online
Retail IBUY.O  and International Online Retail  XBUY.P ,
ProShares Online Retail  ONLN.P , ProShares Long Online/Short
Stores  CLIX.P  and SPDR S&P Internet  XWEB.P .
    There is even a new index created by MSCI (https://bit.ly/2OeOn8Z),
 a provider of analytics and solutions for financial firms,
which identified the digital economy as one of its societal
"Megatrends." That likely means that more such ETFs will be in
the pipeline, since investment firms can now roll out their own
e-commerce ETFs based on that underlying index.
    A few tips for investors who might be stuffing e-commerce
ETFs into their holiday stockings:
    * Look under the hood. 
    Not all e-commerce ETFs are built alike. Some are highly
concentrated, and some are more diversified, so proceed
according to your own risk tolerance.
    ProShares Online Retail, for example, has almost a quarter
of its entire assets in Amazon, and another 13% in Chinese
Internet giant Alibaba  BABA.N . If you want to bet on the big
winners - and Amazon has certainly been a big winner - that
would be the way to go, said Todd Rosenbluth, head of ETF and
mutual fund research at independent research firm CFRA.
    But Amplify’s IBUY has Amazon making up only a more modest
3.4% of its portfolio. If you want to spread your bets more
evenly throughout the space, that would be a more appropriate
pick.
    *Dig into the numbers. 
    Fees are any portfolio's silent killer. Concentrated ETFs
may offer lower expense ratios than traditional mutual funds,
but higher than broader exchange-traded offerings - like, say,
Vanguard's Total Stock Market ETF  VTI.P , and its microscopic
.03% fees.
    In comparison, the relatively new Global X E-Commerce comes
with a .68% expense ratio, and ProShares Long Online/Short
Stores carries a similar .65% charge.
    As for performance, e-commerce ETFs have generally
experienced a bumpy fall, thanks to trade wars and recession
worries. IBUY, for instance, has outperformed the S&P 500 on a
two-year timeframe, but underperformed year-to-date. While that
offers a potential buying opportunity, ask yourself whether you
are comfortable with an occasionally wild ride.
    "Typically investors will find more volatility in narrower
slices of the market like this," said Deborah Fuhr, founder and
managing partner of independent London-based ETF consultancy
ETFGI. 
    *Expand your horizons. 
    The United States may be the 800-pound gorilla of
e-commerce, but there is money to be made outside its borders as
well. To wit: the Emerging Markets Internet & Ecommerce
 EMQQ.P , suggested Fuhr. Its basket includes familiar Chinese
names like Baidu  BIDU.O  and Tencent  0700.HK , and boasts
robust year-to-date returns of over 32%.
    * Consider size and scope. 
    In the ETF world there is a fair amount of churn: If small
thematic funds do not manage to attract enough assets, they
occasionally close up shop. So check the total assets and know
that a fund's long-term future is not guaranteed.
    * Thematic ETFs are a complement, not a core.
    Thematic ETFs are a nice complement to a more broadly
diversified portfolio. But notes Rosenbluth: "Investors
shouldn't get carried away with them."








 (Editing by Beth Pinsker
Follow us @ReutersMoney or at http://www.reuters.com/finance/personal-finance.)
 ((beth.pinsker@thomsonreuters.com; 1 646 223 7289; Reuters
Messaging: beth.pinsker.thomsonreuters.com@reuters.net))

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