A version of this article was published in the December 2018 issue ofMorningstar ETFInvestor.Download a complimentary copy ofMorningstar ETFInvestorby visiting the website.Narratives have been used to lure investors for centuries. Simple, compelling stories tap into our emotions, hijack our ability to think rationally, and persuade us to pursue investments that are unlikely to perform well. Persuasive narratives are prevalent with thematic exchange-traded funds. These funds attempt to capitalize on the growth of popular trends like cybersecurity or the spending habits of millennials, but they face several obstacles that might prevent them from delivering attractive performance.Compelling Stories Drive SpeculationThe South Sea Company of early 18th century England exemplifies how a well-… Full Story

You may recall that 2018 ended with a pratfall. In the fourth quarter, the S&P 500 lost 13.5%, and foreign indexes lost around 11.5%. It's been 10 years since we had a true bear market, so these little downturns are useful as tests to see if our expectations about a fund's risks are still on the money.With that in mind, let's look at a few of the best and worst performers in the fourth quarter and what that tells us about them. And, of course, we are doing this exercise to get a glimpse into a fund's risk profile, not because we think you should select your investments based on returns in a three-month period.Merger FundFourth-quarter 2018 return: 1.90%There are more-sophisticated strategies in the land of alternatives, but plain old merger arbitrage still has lots of appeal. Consider this fund's welcome posit… Full Story