ETF Database » RWL

For ETF Investors, The Details Matter

Michael Johnston — Mon, 10 Jan 2011 14:32:40 +0000

When constructing a portfolio, most investors focus on the decisions that seem to have the most significant impact on the risk/return profile delivered. How much should be allocated to stocks vs. bonds? What breakdown between developed and emerging markets is desired? What sectors should be overweight, and which should be avoided? These decisions obviously go a long way towards determining the bottom line returns delivered by a portfolio. But for investors who have embraced ETFs as a means of achieving exposure, there are a number of seemingly minor factors that can have a surprisingly large impact on their financial health. Below, we highlight five of these easy-to-overlook considerations that can add up to big differences in return [for more ETF insights, sign up for our free ETF newsletter]: 1. Weighting Methodologies Many ETF investors pay a great deal of attention to certain attributes of their equity exposure, such as the [...]

Click here to read the original article on ETFdb.com.

Ten Commandments Of ETF Investing

Michael Johnston — Thu, 21 Oct 2010 11:05:53 +0000

As ETFs have burst on to the scene in recent years and worked their way into the investing mainstream, the number of products available and complexity of exposure offered has increased significantly. Advisors and investors have taken steps to educate themselves on the ins and outs of ETFs, but many are still scrambling to play catch-up and unaware of the complexities these products can present. What began as a handful of securities seeking to replicate widely-known stock and bond indexes has grown into a lineup of more than 1,000 funds, offering exposure to nearly every asset class, region, and investment strategy imaginable. While this impressive growth has enhanced the arsenal of securities available to ETF investors, it has also created the potential for misuse and made finding the right ticker symbol a bit more challenging. And while ETFs offer countless potential advantages relative to strategies that revolve around mutual funds [...]

Click here to read the original article on ETFdb.com.

Are Your Cap-Weighted ETFs Leaders Or Laggards?

Cathy Carlson — Tue, 13 Jul 2010 16:07:03 +0000

The rapid growth of the ETF industry in recent years has altered the investment landscape in more ways than one. The low expense ratios offered by most exchange-traded products have brought increased scrutiny on active managers and called into question their ability to add value to client portfolios. The immediate diversification offered by a basket of securities has caused some to shift away from the complex research associated with individual stock picking towards more macro analysis required for tactical strategies. And as indexes have evolved from hypothetical measures of performance to essentially investable assets, the methodologies utilized in the construction and maintenance of benchmarks have become increasingly important to investors [see our database of ETF indexes]. The first generation of equity ETFs was dominated by market capitalization-weighted strategies, a methodology that involves assigning a weight to each component based on the total value of its equity. Most of the assets [...]

Click here to read the original article on ETFdb.com.

Beyond SPY: Nine Alternatives To S&P 500 ETFs

Michael Johnston — Wed, 21 Apr 2010 21:29:17 +0000

When ETFs began to make their way into the investing mainstream, almost all products were “plain vanilla” funds linked to well known stock benchmarks, such as the Dow Jones Industrial Average and S&P 500. But as the popularity of ETFs has surged, so too has the number of product offerings, with approximately 30 issuers now competing for a slice of a still-growing pie. In addition to offering exposure to different asset classes (such as commodities, volatility, and hedge funds), 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. Between SPY and the iShares S&P 500 Index Fund (IVV), assets in S&P 500 ETFs at the end of March exceeded $100 billion, or about 12% of total ETF assets. So [...]

Click here to read the original article on ETFdb.com.

Revenue Weighted ETFs Continue Impressive Run

Michael Johnston — Tue, 30 Mar 2010 15:47:17 +0000

The rise of the ETF industry has changed a lot about the business of investing. It has altered the way investors look at expenses, making it difficult to justify handing over 200 basis points (or more) each year to an active manager who can’t regularly beat a benchmark. It has also expanded the universe of investable securities; asset classes that were once available only to the biggest and richest investors (such as hedge fund strategies and commodities) are now readily available to anyone with an online broker. ETFs have also changed the way investors look at indexes. When indexes were primarily benchmarks used to measure manager performance, few gave much thought to the rules or investment theses governing the construction and maintenance. But as indexes have evolved into (essentially) investable assets, the underlying methodologies have been more carefully scrutinized. As a result of this increased scrutiny, some of the flaws [...]

Click here to read the original article on ETFdb.com.

Five Twists On S&P 500 ETFs

Michael Johnston — Tue, 27 Oct 2009 07:00:52 +0000

The S&P 500 is one of the most widely-followed benchmarks in the world, a bellweather of the American economy that is included in the Index of Leading Indicators. Composed of 500 of the largest stocks listed in the U.S. (as well as a handful of non-U.S. companies), the S&P 500 has a weighted average market capitalization of approximately $80 billion, and includes companies across all sectors of the economy. With the rise of indexing as an investment strategy, it’s not surprising that S&P 500 ETFs are among the largest and most heavily traded. With a market capitalization of more than $57 billion, the SPDR S&P 500 (SPY) is by far the largest ETF, nearly $20 billion larger than its closest competitor. The iShares S&P 500 Index Fund (IVV) comes in at number four on the list with almost $21 billion in assets, meaning that U.S. investors have nearly $80 billion [...]

Click here to read the original article on ETFdb.com.

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, [...]

Click here to read the original article on ETFdb.com.

Talking Revenue-Weighting, Alpha-Generating ETFs With Sean O’Hara

Michael Johnston — Wed, 16 Sep 2009 08:00:53 +0000

Sean O’Hara is the President of RevenueShares Investor Services. He recently took time out of his busy schedule to talk about weighting methodologies, alpha, and more with ETF Database. ETF Database: Market capitalization-weighted indexes are widely accepted and used among investors, but they aren’t without their flaws. Why might these cap-weighted indexes be less than ideal for benchmarking purposes? Sean O’Hara: Market cap-weighted benchmarks are price driven. There has been a lot of work done on the efficient market theory, and I think most investors would agree that over time the market is efficient, but in the short run it can be fairly inefficient. A cap-weighted index tends to push the highest price stocks to the largest weighting and the lowest price stocks to the smallest weighting. We believe that has some flaws in it. At RevenueShares, we rebalance the index on an annual basis to put the emphasis on [...]

Click here to read the original article on ETFdb.com.

Citi Rebalancing Highlights Benefits of Revenue Weighted ETFs

Michael Johnston — Fri, 07 Aug 2009 15:33:44 +0000

When Citigroup (C) agreed months ago to accept federal bailout money, the move came with more than a few strings attached. And now one of those strings is pulling on traditional market capitalization-weighted equity indexes, as well as the ETFs that track them, to make some interesting moves. Despite a relatively stable share price, Citi’s market capitalization surged this week as the company converted a slug of the preferred stock issued to the government in return for bailout funds to common equity. Such actions, which once upon a time went largely unnoticed, have become significantly more important as a result of the tremendous rise in popularity of index funds and ETFs. Now, such an action spurs rebalancing sprees, forcing several large funds to adjust their holdings to conform with an updated benchmark. Citi recently announced that it is moving forward with a plan to convert a huge portion of its [...]

Click here to read the original article on ETFdb.com.

Revenue-Weighted ETFs: A New Twist On an Old Drink

Michael Johnston — Wed, 24 Jun 2009 09:00:01 +0000

As ETFs have become the investment vehicle of choice for an increasing number of asset managers and individual investors, the landscape continues to evolve, sometimes seemingly on a daily basis. The first ETFs to burst onto the scene generally tracked traditional asset classes and indexes. And while these “plain vanilla” funds remain among the most popular investor choices today (State Street‘s SPY, which tracks the S&P 500, is acknowledged as the first U.S. ETF, and today remains the largest and most actively-traded ETF), numerous funds tracking non-traditional assets and indexes have sprung up in recent years, expanding the reach of ETFs to nearly every corner of the investment sphere. Worth the Weight? The vast majority of ETFs on the market today track indexes constructed using traditional market capitalization-weighting methodologies. While market capitalization-weighted indexes have many advantages and are widely accepted and understood by investors, there are some drawbacks that have opened the [...]

Click here to read the original article on ETFdb.com.

ETF Database » RWL

For ETF Investors, The Details Matter

Related Posts:

Ten Commandments Of ETF Investing

Related Posts:

Are Your Cap-Weighted ETFs Leaders Or Laggards?

Related Posts:

Beyond SPY: Nine Alternatives To S&P 500 ETFs

Related Posts:

Revenue Weighted ETFs Continue Impressive Run

Related Posts:

Five Twists On S&P 500 ETFs

Related Posts:

Weighting Methodologies: An ETF Report Card

Related Posts:

Talking Revenue-Weighting, Alpha-Generating ETFs With Sean O’Hara

Related Posts:

Citi Rebalancing Highlights Benefits of Revenue Weighted ETFs

Related Posts:

Revenue-Weighted ETFs: A New Twist On an Old Drink

Related Posts: