The U.S. stock market has presented some conflicting trends this year. On the one hand, investors entered 2023 fearing a recession and an earnings dip. despite those concerns, the S&P 500 has still grown by more than 10% year to date. That said, it’s dipped since finishing a strong period over the summer.
That may invite investors to take a closer look at the U.S. equity ETF, the (OUSA ) and its factor and cap approach.
OUSA tracks an index that chooses and weights large-cap U.S. stocks. The U.S. equity ETF emphasizes four factors: high quality, low volatility, high dividend yield, and dividend quality. It chooses its constituents from the S-Network U.S. Equity Large-Cap 500 Index. The fund also places a 5% cap at each quarterly rebalance and applies a sector weight cap.
Why consider such an approach? While many indexed strategies simply copy their indexes or just attempt to replicate them, OUSA adds a helpful spin. That 5% cap, for example, could limit OUSA’s overexposure to some of the more top-heavy names in the S&P 500. While it is indexed and retains those benefits, the quarterly rebalance can also keep OUSA flexible, looking out for positive opportunities.
That sector weight also helps limit exposure if a whole sector struggles. What’s more, the U.S. equity ETF also emphasizes dividends. Not only does a dividend strategy add helpful current income to a portfolio, leaning on dividends can help identify firms with healthy outlooks.
OUSA can present an interesting spin on a standard U.S. equity ETF. The strategy charges a 48 basis point (bps) fee to track its index. Returning 6.8% over the last three years, it may be a solid option for curious investors.
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