

	An ETF, or exchange traded fund, is a security that is designed to track an index, a commodity or a basket of assets like an index fund, but is more flexible and trades like a stock on an exchange.  An ETF gives you the diversification of an index fund and the benefits of single stock ownership like the ability to sell short, buy on margin and purchase as few as a one share in any transaction.  Though these benefits are extremely attractive, the expense ratios of ETFs are far lower than those of the average mutual fund.  Unfortunately, there are some down sides, such as the need to pay a commission on any trade involving ETFs, just as you would pay on a stock order.  Another benefit of ETFs is the wide variety of funds available.  Though these benefits are clearly stated, it is always a good exercise for the savvy financial investor to evaluate whether stated benefits, like diversification, do indeed exist, and the extent to which they exist.  For the purposes of this effort, we will be examining the ETF IHF and comparing it against the top 10 holdings that comprise the ETF to determine whether the benefits of a owning a single ETF come close to the benefits of owning a diversified portfolio of the ten stocks and also whether or not there are better configurations of the same stocks that would provide a more optimal sharp ratio or return.
	In order to evaluate the ETF, it would become rather unwieldy to include every holding, therefore we have decided to include only the top ten holdings accounting for 63.58% of all the assets in the ETF.  Below are the top 10 holdings and the percentage of total assets.

	In order to gain an estimation of how well these ten stocks represent the ETF IHF as a whole, we can use the current % of assets, normalized to 100%, to  calculate the contributions of each stock to a portfolio’s Beta and Return if the portfolio was made up entirely of these 10 stocks in the proportion that the ETF has established through their holdings.  The calculations of Beta and return are included in the below chart.

From the above chart it is evident that the return of a portfolio containing only the top 10 holdings is 6.11% higher than the ETF, a 16% increase in returns.  It is also evident that the Beta of the top ten holdings is .12 lower than the ETF as a whole.  From the results completed thus far, it seems that a portfolio of just the top 10 holdings could provide a higher return with a lower beta.  However, there is a possibility that the means of these two portfolios may not be statistically different from each other.
	In order to evaluate whether or not these portfolios are statistically different, the standard deviation of each of the top 10 stocks is determined and normalized to 100% in order to compare their accumulated standard deviation to that of the ETF IHF. 