Exchange Traded Fund Weighting Strategies are starting to become really important to investors.
Jeremy Siegel, a longtime market watcher and professor at Wharton School, has proposed an alternative to popular market value-weighted funds, especially ETFs that evaluate holdings based on fundamental factors such as earnings growth, dividends and momentum. I’ve been arguing for decades that I need to consider it.
Now, the flow is slowly changing. Market capitalization-weighted funds remain the most widely held in the $ 5 trillion ETF market, but issuers are becoming more and more comfortable offering factor-weighted and other niche products.
WisdomTree launches Unique US Growth and Momentum Fund (WGRO) Based on several factors highlighted by the company’s advisor, Siegel, in late June. ETFs track the O’Neill Growth Index. The O’Neill Growth Index uses growth investor Bill O’Neill’s strategy to find plays that are likely to be traded at a discounted price.
Jeremy Schwartz, Executive Vice President and Global Research Head of Wisdom Tree, said the success of both strategies depends on the market background.
“Cap weighting works very well in growth-oriented markets over the last 15 years,” he told CNBC. “ETF Edge” this week. “Fundamentals start to work when things really get confused.”
If the market soars too much, Schwartz said, revenue growth and rebalancing for dividends could help.
He said the WGRO keeps track of the index, but rebalances it every month, has some of the highest sales on the market, and is more active than an actively managed fund.
“This high-growth field, innovation field, and SPAC area … can be very helpful. ” SPAC is a special purpose company that acts as a blank check for an entity that seeks to be published.
For Andrew McOrmond, Managing Director of WallachBeth Capital, choosing whether to invest based on market capitalization or fundamentals “must really come in your time range.”
“If the average investor is 35 and retires at 65, he can maintain the course with market capitalization weighting,” he said in the same “ETF Edge” interview. “But now you’re 60 and where the valuation is … you don’t want to be on the other side of the deal when that happens.”
According to McCormond, WGRO is definitely suitable for young investors.
“We need to get all that growth and turnaround, and I believe the expense ratio is reasonable to justify joining this ETF to prepare for some sort of recession. “He said.
Mark Yusco, Run SPAC-based ETFsIn the same “ETF Edge” interview, he said that the real argument was not between market capitalization and fundamental weighting, but between weighting equal to market capitalization.
“That’s a big difference. If you buy S & P 500, 5-6% of them Apple Whether you think it’s a good buy. And there is no choice, no decisions, no thoughts, “said Morgan Creek Capital Management CEO and Chief Investment Officer.
“Using a portfolio of the same weights gives us more opportunities for rebalancing, and I think monthly rebalancing (which has the same cadence as ETFs) is very important,” says Yusco.
ETF weighting and average investor
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