Factor-Based ETFs Your Broker Forgot to Mention

Page 1 of 2

Factor-Based ETFs Your Broker Forgot to MentionA long-standing staple of the ETF business has been, and probably always will be to some extent, the passively managed index fund. An index fund, in most cases, is everything its name implies: A fund constructed using the securities of a specific index, be it the S&P 500, the MSCI Emerging Markets Index or another index.

Since most indexes are weighted by market capitalization, that means most index funds use cap-weighting methodology. Translation: The index’s largest holdings are usually those with the largest market value.

In terms of gathering assets, this approach has worked well for ETF sponsors, but as the industry has grown, savvy investors have sought out opportunities beyond traditional cap-weighting. Equal-weight ETFs have served as a popular avenue for investors looking to escape the cap-weighting rut.

Additionally, factor-based ETFs have increased in popularity. A simple definition of factor-based ETFs is that these funds are not quite actively managed per se, but they go far beyond the passive, cap-weighting routine by using growth, valuation and technical factors.

Obviously, investors will want to know if factor-based ETFs generate noteworthy returns relative to their cap-weighted rivals. In some cases, the answer is a resounding yes, so do not forget about these factor-based funds.

PowerShares DWA Devld Markt Tech (NYSEARCA:PIZ) PIZ is the developed markets equivalent of the popular PowerShares DWA Emerg Markts Tech (NYSEARCA:PIE).

PIZ excludes U.S.-based companies and its holdings (usually 100, but currently 104) can be domiciled in, but not limited to but not limited to Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom.

And like PIE, PIZ holds stocks that are displaying impressive relative strength traits. That does have a positive impact on returns. Year-to-date and over the past 12 and 36 months, PIZ’s underlying index, the Dorsey Wright Developed Markets Technical Leaders Index, has outpaced the MSCI EAFE Index and the MSCI EAFE Growth Index.

SPDR S&P 1500 Value Tilt ETF (NYSE: VLU) A quick glance at the top holdings of the SPDR S&P 1500 Value Tilt ETF might indicate that this is a cap-weighted ETF. A top-10 lineup that includes Exxon Mobil Corporation (NYSE:XOM), AT&T Inc. (NYSE:T) and Chevron Corporation (NYSE:CVX) has a way of doing that.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!