ETFs have experienced a tremendous surge in popularity over the last several ways, edging into retirement portfolios once dominated by mutual funds, and becoming an attractive alternative to individual stocks for investors looking to make short term bets.
Despite the meteoric rise of the ETF industry, the vast majority of indexes followed by the investment community continue to be comprised of individual equities and fixed income securities. ETF Database has launched the ETFdb 60 Index, the first all-ETF benchmark encompassing the entire universe of investable assets. “ETF Database is excited to launch the most complete all-ETF index on the market,” said Andy Hagans, co-founder of ETF Database and developer of the ETFdb 60 Index. “The ETFdb 60 Index provides a much needed barometer of ETF performance that is diversified across asset classes, geographies, and investment strategies.”
Construction Of The ETFdb 60 Index
ETF Database individually analyzed more than 870 ETFs currently included in the ETF Screener and attributed each to a single ETFdb Category, a “best fit” grouping of funds that share similar risk and return characteristics. In total, we developed 66 ETFdb Categories across a variety of asset classes, geographies, maturities, risk profiles, and investment strategies (see the complete list of ETFdb Categories here).
The ETFdb 60 Index is comprised of the largest ETF (by total market capitalization) from each ETFdb Category, excluding the following:
- Inverse Commodities
- Inverse Equities
- Leveraged Bonds
- Leveraged Commodities
- Leveraged Currencies
- Leveraged Equities
- Leveraged Real Estate
Each component of the ETFdb 60 Index was given an equal weighting as of October 1, 2009. By implementing an equal-weighting methodology, the ETFdb 60 avoids becoming dominated by individual holdings, and in fact allocates no more than 2% to any single component. The ETFdb 60 Index will be rebalanced on an annual basis.
To see all components of the ETFdb 60 Index, visit the index home page.
Diversified Across Asset Classes
The vast majority of widely-followed benchmarks focus on a single asset class, and many benchmarks target specific styles, sizes, or durations within broad categories. The ETFdb 60 Index is diversified across several different asset classes, and includes 32 equity ETFs, 14 fixed income ETFs, 5 commodities ETFs, and 2 real estate ETFs. The ETFdb 60 Index also includes five multi-asset/exotic ETFs from the Diversified Portfolio, Target Retirement Date, Hedge Fund, Long-Short, and Volatility ETFdb Categories.
How To Use (And Not To Use) The ETFdb 60 Index
The ETFdb 60 Index is designed to track the performance of the investable universe available through exchange-traded products. By including ETFs from a variety of asset classes, the ETFdb 60 Index measures the performance of a more inclusive investable universe, reflecting the performance of all investment options. The ETFdb 60 home page provides a snapshot of all component funds, allowing investors to quickly assess the day’s biggest ETF winners and losers, and analyze the impact of macroeconomic trends on securities markets.
Although the assets underlying the ETFdb 60 Index are diversified across asset classes, geographies, investment styles, the ETFdb 60 Index does not necessarily represent an appropriate investment portfolio for all investors. The ETFdb 60 Index contains ETFs that invest in commodities, currencies, and other assets that may not be appropriate for some long-term investors.
ETFdb 60 Index Vital Stats
As of October 14, 2009, the components of the ETFdb 60 Index have average and median market capitalizations of $5.9 billion and $2.5 billion, respectively. The aggregate average daily trading volume of the ETFdb 60 Index exceeds 845 million shares, with a median daily volume of nearly 1 million shares.