Many ETFs now present unique approaches to stock and bond investing by tweaking popular and widely-followed benchmarks. The very first ETF, the S&P 500 SPDR (SPY), remains by far the largest U.S.-listed ETF, reflecting investor familiarity with the underlying benchmark, but there are now approximately 30 other issuers now competing for a slice of this still-growing pie. Words: 789
In further edited excerpts from the original article* Michael Johnston (www.etfdb.com) profiles nine such ETFs and ETNs that put a unique twist on S&P investing:
1. RevenueShares Large Cap ETF (RWL):
– comprised of the same securities as the S&P 500, but ranks each component by top line revenue, not market capitalization, when determining the weighting given to each. As such, RWL will generally overweight stocks with low price-to-revenue multiples and underweight stocks with high price-to-revenue multiples.
– management expense ratio (MER) of 0.49%.
2. WisdomTree Earnings 500 Fund (EPS):
– tracks the WisdomTree Earnings 500 Index which measures the 500 largest market capitalization companies that have generated positive earnings in the past four fiscal quarters. The companies are weighted based upon “core earnings,” a calculation of earnings that includes expenses, income, and activities that reflect the actual profitability of a company’s operations.
– MER of 0.28%.
3. First Trust Large Cap Core AlphaDEX (FEX):
– tracks the “enhanced” Defined Large Cap Core Index. This benchmark is constructed by ranking S&P 500 stocks on a series of growth and value factors, such as price appreciation, sales-to-price, and cash flow-to-price. Stocks receiving the highest weighting are included in the index, with bigger weightings given to the top-ranked equities.
– MER of 0.70%
4. PowerShares Dynamic Large Cap Portfolio (PJF):
– tracks the performance of another enhanced benchmark, the Dynamic Large Cap Intellidex Index which includes stocks, in a certain market segment, that have the greatest potential for financial growth. The benchmark analyzes potential component stocks by calculating unique financial characteristics from four broad financial perspectives: fundamental, valuation, timeliness and risk.
– MER of 0.60%.
5. ALPS Equal Sector Weight ETF (EQL):
– offers exposure to the domestic large cap equity market but, unlike SPY, it gives equal exposure to each sector of the economy, investing in equal proportions in all nine of the Select Sector SPDRs. This gives the fund the advantages of diversification, the opportunity to participate in a market rally, and potentially lower exposure to overvalued corners of the market.
– MER of 0.55%
6. Rydex S&P Equal Weight ETF (RSP):
– follows the performance of the S&P Equal Weight Index, a benchmark that includes all constituents of the S&P 500. As its name suggests, RSP gives an equal weighting to each component, meaning that upon rebalancing all of the 500 stocks in the S&P 500 are given an equal weight of 0.2%. For investors who dislike the tendency of cap weighted benchmarks to overweight overvalued stocks, RSP offers a price blind alternative for large cap exposure.
– MER of 0.40%
7. UBS E-TRACS S&P 500 Gold Hedged ETN (SPGH):
– measures the S&P 500 Gold Hedged Index, a benchmark that simulates the combined returns of investing equal dollar amounts in the S&P 500 Total Return Index and long positions in near-term exchange-traded COMEX gold futures contracts. As such, SPGH provides investors with a hedge against declines in the value of the U.S. dollar relative to gold bullion.
– MER of 0.85%
8. ProShares Credit Suisse 130/30 (CSM):
– tracks the Credit Suisse 130/30 Large-Cap Index, using a unique strategy by shorting the stocks predicted to perform poorly, and doubling down on those that are expected to outperform. For each stock in the universe, expected alpha scores are calculated to determine the position taken. A portfolio optimization process is used to ensure that the long/short portfolio maintains similar risk characteristics to the long-only large cap universe. The ETF’s name refers to the fact that the portfolio maintains 30% short exposure and 130% long exposure, resulting in a net 100% long position.
– MER of 0.95%
9. WisdomTree LargeCap Dividend Fund (DLN):
– follows the WisdomTree LargeCap Dividend Index, a fundamentally-weighted benchmark that measures the performance of the large-capitalization segment of the U.S. dividend-paying market. Allocations given to individual stocks are determined based on cash dividends paid. This methodology may create a bias towards value stocks, and concentrates exposure among the biggest dividend-paying firms..
– MER of 0.28%
*http://seekingalpha.com/article/200089-s-p-500-etfs-9-alternatives-to-spy?source=email (ETF Database provides news, analysis and offers a proprietary ETF Screener that allows investors to filter the universe of 900+ ETFs to find the right fund.)
– The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
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