FRIDAY Fund – EVX VanEck Vectors Environmental Services ETF

When looking at a recent news article I saw mention of ETF EVX as an investment. The article headline was “Make a Dash for Trash Stocks with VanEck ETF.” Let me count the reasons I think this is a terrible idea. The purpose is not to trash VanEck (pun intended), but to help you think critically about ETF investments. While it is possible to look at just a couple of elements to pick a good ETF investment, here is a deeper dive:

1) EVX’s total assets are less than $100M. EVX holds a meager $29M. For a fund in existence since October 2006, that is laughable. As a result, trading volume is very light. Be very careful! This is not actively traded.

2) Analyst ratings are helpful. The XTF rating is 1.3 out of 10. That is awful.

3) The expense ratio is 0.56%. For a passively-managed fund, there is no excuse for such a high cost. Also see the next point.

4) A surprise might be coming for investors when it comes to the expense ratio. It might and could increase to 0.98% in February 2020. That is sneaky.

5) EVX pays a dividend annually, even though some of the holdings pay quarterly. Who is using the dividend while you wait? Also, the dividend yield is a joke: 0.33%. In other words, the little dividend you receive is gobbled up by the expense ratio.

6) 73% of the fund is focused on the Industrial sector. There are far better industrial ETFs you can buy. For example, FIDU (Fidelity® MSCI Industrials Index ETF) pays a 1.79% dividend yield and has a 0.08% expense ratio. FIDU’s XTF rating is 8.0. There are 341 holdings in FIDU, so it has better diversification. FIDU also pays the dividend quarterly.

7) EVX only has 22 holdings. That is poor diversification.

8) EVX can be rebalanced quarterly. Rebalancing is the process of realigning the weightings of a portfolio of assets, by buying or selling assets in a portfolio to maintain an original desired level of asset allocation. This isn’t necessarily good.