Many investors proclaim the effectiveness of the value-investing strategy. Value investing involves selecting companies whose stock prices seem to be lower than expected, given their fundamental strength and the valuation of similar companies. This investment approach is based on the view that the market will achieve equilibrium in the future and stock prices will rise, based on more typical valuations. One exchange-traded fund (ETF) that allows investors to pursue this technique is iShares Russell 1000 Value Index ETF (IWD).
In the last 12 months, this fund is up a respectable 6.82%. Comparatively, investors have not been flocking to value stocks during this period. But value stocks do tend to perform best in the long run. Eventually, IWD should revert to the mean. If we look back even as little as three years, the fund’s performance is more impressive. The index IWD tracks is focused on companies that are undervalued compared to competitors and similar companies.
Net assets of $26 billion under management make this fund a big player in the ETF market. Though it is more focused on stock prices that are likely to increase than on dividends, IWD does offer a 1.26% dividend yield. Its expense ratio is only 0.20%.
IWD’s largest sector holding by far is financial services, weighing in at 29.7%. Healthcare accounts for another 14.75%, and energy makes up 10.89%. IWF invests 23.63% of its assets in its 10 largest positions. These are primarily large, well known companies with relatively low share prices. They include ExxonMobil (XOM), 3.58%; Berkshire Hathaway Inc. Class B Shares (BRK.B), 2.60%; Wells Fargo (WFC), 2.54%; General Electric (GE), 2.45%; and Johnson & Johnson (JNJ), 2.36%.
This fund provides a simple way to include a value-oriented strategy in your portfolio without tying your fortunes to a small set of companies. If this is what you seek, iShares Russell 1000 Value Index ETF (IWD) may serve you well.
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In case you missed it, I encourage you to read my e-letter column from last week about a popular REIT ETF. I also invite you to comment in the space provided below.