Thrift Savings Plan

After reading the Washington Post article today, Housing’s Bright Spot: Stocks, I had to jump in with my two cents on the topic.

The report indicated that shares of U.S. home builders rose 18.5% in the first quarter of 2008. They didn’t say which shares, index or companies. I jumped over to Select Sector SPDRs and typed in XHB which is the ticker symbol for the S&P Homebuilders ETF. If you play with the charting feature there, you’ll find that the ETF began January 2, 2008 at $19.35/share and ended March 31, 2008 at $21.78/share. If you run the numbers, that’s a 12.6% return in only three months. And this index is something you can invest in, unlike the phantom 18.5% return quoted in the Post.

The article then quotes two people who are skeptical of the longevity of the rise in home builders, Seth Jayson of Motley Fool and Parrish Glover of Morningstar. I don’t know either guy nor do I know how well they perform as analysts. But here’s what I can tell you.

At the beginning of the year, January 25th to be exact, I happened to notice the XHB was beginning to rise off its worst lows in some time . I decided to dip my toe into the proverbial waters and picked up a few shares knowing it was a risky move as the sub-prime slime continued its oozing into the new year.

I’m glad I did. And I’m glad I didn’t listen the nay-sayers saying it’s not the time. As of the date of this post, my investment in XHB is up 16.1% since jumping into the ETF. This is a prime example of betting against the crowd, or contrarian investing.

Glover does go on to say that there are some companies worth looking at for possible consideration for investing: NVR, Meritage Homes, M/I Homes and Toll Brothers (actually, Eric Landry of Morningstar suggested Toll). Interestingly enough, all of these companies except for M/I Homes are members of the XHB ETF.

I think it’s still a good time to jump into home builders. But I would do it with a small amount of your overall portfolio, and do so by either purchasing a diversified mutual fund that specializes in home builders or the XHB which is an Exchange Traded Fund (EFT).

If you still want to do some contrarian investing, take at look at XLF which is the S&P Financials ETF. That’s a whole new blog entry!

In my previous post, I mentioned how it might be a good time to step in and buy some beaten down stocks. While conducting my weekly research for investment ideas, I came across this article. It may assist you in finding good deals among the market’s recent carnage.

If you can’t, or don’t want to, invest in individual financial stocks, then look to mutual funds that specialize in the financial sector, like Fidelity Investment’s Select Banking Portfolio. A mutual fund will provide you with… diversification! This is not a recommendation for that fund; it’s only an example. Do your own research before investing.