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NYCC: Hundred-Year-Old Blue Chips? Not as Good as It Sounds

The NYCC ETF is an intersting concept, but investors could be better suited elsewhere.

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Based on their age, both struggling retailers Sears Holdings (SHLD) and JCPenney (JCP) are included. Odds are SHLD and JCP won’t even be around in five years.

Other Alternatives to NYCC

The new NYCC ETF isn’t necessarily a bad portfolio of firms and you can’t blame PowerShares for trying something new. The ETF’s equal weighting does provide plenty of small- and mid-cap exposure, which has helped it in the return department over the course of its short history (36.85% in roughly a year).

Yet, at 372 different stocks and 0.5% in expenses (or $50 annually per $10,000 invested), you’re basically buying a kind-of-expensive index fund.

And there are better index funds that don’t have the “century” gimmick.

PowerShares uses the S&P 500 as the benchmark for NYCC. But with nearly 72% of its portfolio in small caps and midcaps, comparing it with a completion index could be a better benchmark. The Vanguard Extended Market Index ETF (VXF) basically tracks all the small-cap and midcap stocks not included in the S&P 500. For just 0.14% in expenses, investors would have gotten a NYCC-beating return of 38.11% over the last year.

Add in a dose of the practically free-to-own Vanguard S&P 500 ETF (VOO), and you have roughly the same return for the NYCC, but with broader diversification and reduced ownership costs.

And if you really like the idea of owning a “century” portfolio,” fellow InvestorPlace contributor Will Ashworth’s favorite mutual fund could be a better bet. At its founding in 1935, the ING Corporate Leaders Trust Series B (LEXCX) purchased 30 of the leading American blue-chip corporations of the day. No new stocks can be purchased, and the holdings only change because of spinoffs or mergers.

The passively managed fund now holds just 22 different stocks, and a $10,000 investment would be worth around $635,000 if held over the last 40 years. That performance has simply destroyed both the S&P 500 and Dow Jones Industrial Average.

Plus, at 0.52% in fees, it’s only slightly more expensive than the new, untested NYCC.

Bottom Line

The new NYCC ETF is an interesting concept, but investors’ money is best used elsewhere.

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As of this writing, Levitt was long VXF.

Article printed from InvestorPlace Media,

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