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If we view a chart of ETF (VT) stocks from the Vanguard Total World Stock Index Fund, we can see that the stocks are now trading firmly below the ETF’s major moving averages. Earlier profit taking in VT was to be expected given the strong gains the fund has made over the past 24 or so months. Given the double top reversal pattern that has recently played out in VT as well as the resulting major overhead resistance now, we recommend investors continue to look at VT from the long side but more from a to-side perspective. short term. . From our perspective, we would need to see the stock price clearing the 30-day moving average ($101.18) convincingly before we consider putting long deltas to work here.

Before we get into why we’re still bullish on this ETF, let’s touch on a bit about the advantages of short-term investing over its long-term counterpart. As noted, the main reason why the short term (once we get to a bottom) is more advantageous right now is the overhead resistance now prevailing on the technical chart. Here are also other points that help the short-term investor in special circumstances.

  • New investors can cut their teeth quickly in this sector by trading more short-term. Multiple decisions over shorter time frames bring much-needed experience to the table that would otherwise not have been gained.
  • When it comes to a company in this sector, short-term investing allows the investor to adjust their respective position when something has fundamentally or technically changed. On the contrary, long-term holds are rarely so closely monitored, which means that on occasion, temporary withdrawals can turn into significant paper losses over time.

Suffice it to say, here’s why we think VT remains a strong near-term vehicle once the ETF returns to bullish mode.

VT ETF Technical Analysis Chart: Near a Trading Low

VT ETF trying to catch a bid (Stockcharts.com)

Being a fund that is diversified across multiple regions in terms of growth and value, the over $24 billion fund’s risk is well below that of many of its peers due to its high level of liquidity. This is essentially what ETF investors are looking for, namely high liquidity and diversification in one fund. Currently, VT has over 9,000 holdings in the fund in sectors such as technology, finance and healthcare, to name a few. Suffice it to say, the peers simply can’t compete with VT’s sheer number of holdings.

This may explain why VT’s implied volatility in March is currently just under 27%, which is quite low given the volatility in equity markets due to what happened in Ukraine. Implied volatility levels are a solid read on investor fear of the fund in question. Again, due to the lack of volume and diversification of VT’s competing funds, a competitor such as the SPDR Global Dow ETF (DGT) would currently report higher volatility (fear) levels.

chart showing implied volatility of VT

Historical and implicit volatility in VT (Interactive Brokers)

Additionally, Vanguard Total World Stock Index Fund ETF Shares has an ultra-low expense ratio of 0.08%, which is much lower than other global funds on average. Assets under management, as shown, increased by approximately $24 billion and the growth in these assets far exceeded the median for the asset class. Over the past 12 months, for example, AUM in VT has increased by nearly 42% while the global ETF space, in general, has only seen inflows of around 19%. Yes, there has been a sharp drop in asset flows over the past 30 days (similar to competing funds), but that’s to be expected given what’s going on in the world right now.

The increase in VT’s assets under management led to a sharp increase in the last quarterly dividend which was paid on December 23rd. If indeed we annualize the quarterly distribution of $0.785, the forward dividend yield currently stands at 3.14%. It will be interesting to see what the March distribution will be given the recent volatility that has led to lower growth in assets under management, but investors are hoping for the same.

So, to sum up, VT’s dividend, liquidity, growth in assets under management, and low volatility all play into the bullish case for this particular fund. However, given the current evolution of ETF technicalities, we believe that investing in this vehicle for shorter periods will pay better dividends for some time to come. We look forward to continued coverage.