August 2013 Dow Jones & Nasdaq Forecast

I continue this series on Harry Dent from two previous articles, here and here .

Seizing upon his media celebrity, (which essentially means you have sheep lining up for your perceived expertise, created solely by being seen on television) Dent formed an ETF in 2009 called the Dent Tactical ETF (DENT). This is one of those actively managed ETFs you may have heard about.

The fundamental problem with actively managed ETFs is that they absolutely defeat the purpose of ETFs; low fees. Actively managed ETFs charge higher fees for management of the holdings.

Although most actively managed ETFs still have lower fees than non-index mutual funds, if given the choice between the two youre better off paying higher fees and buying mutual funds. Of course that assumes you were only given those two choices, as I am not a fan of mutual funds, especially during bear market periods.

If you don’t already know why, click here .

Target date funds offer another false epiphany. Click here to see why.

The logic behind actively managed ETFs is nearly as flawed as active management of mutual funds (like Fidelitys widely advertised and I should add completely useless program). You cannot provide any real value using either approach. In each case you are paying higher fees in exchange for some decision-maker to essentially throw darts.

When the actively managed ETF holds several ETFs, as is the case with DENT, its an even worse situation. Active management is best utilized for managing individual securities because you are able to base your decisions on the fundamental and technical data of each security.

Just by reading the description, its obvious to me the Dent Tactical ETF (DENT) is a completely useless investment vehicle, unless your goal is to have fees deducted from your account while losing money.

The objective of DENT is long-term growth of capital. It invests in other exchange-traded funds, and shares of certain exchange-traded products, including but not limited to, exchange-traded notes, exchange-traded currency trusts and exchange-traded commodity pools. It also invests across several assets such as domestic and foreign equities, domestic or foreign fixed-income or commodities.

Lets have a closer look at the Dent Tactical ETF (DENT). As the chart below shows, since inception, DENT has delivered miserable returns when compared to the Dow, Nasdaq and S&P 500. In addition, after deducting the 1.5% annual expense ratio, youd end up with a nice annual loss.