Weighting Methodologies: An ETF Report Card

Michael Johnston — Tue, 27 Oct 2009 06:00:50 +0000

Advisors and individuals who favor a tactical asset allocation to investing have historically analyzed broad macroeconomic trends and statistics to identify asset classes and sectors poised deliver strong returns. In the early days of the ETF industry, this meant homing in on a certain sector or style and picking the fund that tracked that segment. But as the landscape has continued to evolve, asset class and investment style aren’t the only decisions investors face. Market capitalization weightings were once the only game in town, but in recent years alternative weighting methodologies have become more popular among investors who find flaws in a strategy that gives the most weight to the biggest companies. The vast majority of ETF assets is still in traditional market capitalization-weighted funds (and most of the largest and most popular ETFs fall into this category). But investors have embraced a number of other strategies in recent years, [...]

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Weighting Methodologies: An ETF Report Card

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