YIELD OF DREAMS: Don’t Let These ETFs Fool You

I hate it when you bite into a piece of chocolate expecting a delicious creamy taste, and instead you get a rush of coconut or orange flavor, leaving a bad taste in your mouth. As Forrest Gump says, ‘Life is like a box of chocolates; you never know what you’re gonna get.’ Same goes for some ETFs. A new report by institutional consultant Casey Research takes a look at the 10 most misleading ETFs on the market.

Some are household names, while others are more exotic and esoteric funds. But what they all have in common is that their names are misleading as to what the fund actually invests in. Senior Analyst Vedran Vuk points out in the report that not all of these funds are bad; some have in fact performed quite well. And just because a fund is not on the list doesn’t mean the fund is straightforward, Vuk says.

As exchange-traded funds (ETFs) became the new craze, companies hastily threw together packages of securities, gave them snazzy names, and sent them out on the market. Few investors closely investigated the holdings or the mechanics – and the fund names made things even more confusing. The old saying, “Don’t judge a book by its cover,” is just as important in the investment world as anywhere else in life.

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(Read more from Staff Writer, Diana Britton on her blog, Yield of Dreams.)