Smart-Beta ETF Provides Exposure to Mid- and Large-Caps

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

The iShares Russell 1000 Value ETF (IWD), at over $36 billion in assets under management, ranks as the biggest smart-beta fund and as one of the most popular currently on the market.

Advertisement.

Smart beta “has emerged as one of the most exciting and hotly debated investment trends of the past 10 years,” according to ETF.com. Going by many different names (strategic beta, fundamental indexing, factor investing and more), smart beta is a catchall term for rules-based strategies that aim to deliver better risk-adjusted returns than traditional market-cap-weighted indexes.

Today, there are hundreds of ETFs and, if you count institutional assets, hundreds of billions of dollars benchmarked against smart-beta indexes. One advantage to owning smart-beta-oriented exchange-traded funds (ETFs) is precision risk management.

Investors looking for a perfect balance between risk and return can make a single purchase of a smart-beta ETF and have access to a select portfolio spread across multiple sectors and companies. This scenario can work a lot better than traditional stock picking, where investors looking for a good risk-return combination would have to sift through thousands of stocks and multiple different sectors to find the ideal combination. At the very least, such an undertaking is a difficult juggling act.

Advertisement.

Investors also may be attracted to smart-beta ETFs for their lower-cost fees. While a mutual fund can charge 0.5-1.0% in management fees, smart-beta funds tend to have expense ratios south of 0.50%, with some even as low as 0.08%. As an iShares fund, IWD has a higher cost of 0.2% than some similar funds, such as the Vanguard Value ETF (VTV) with its 0.06% fees. But IWD still is very modest in the broader scope of expense ratios for ETFs.

Exclusive  Stocks Hit New Highs… Then Bitcoin… and Now Gold: Welcome to the New Roaring Twenties!

IWD offers exposure to a range of large- and mid-cap U.S. companies that are considered to be undervalued by the wider market. Year to date, the fund has underperformed the S&P 500, only generating a 4-5% return. Yet this is largely because the market is currently favoring growth stocks, which lean toward the technology and health care sectors, among others.

By contrast, value investing favors currently beaten-down sectors such as energy and financials. However, a lot of analysts believe that the market’s preference for growth could be coming to an end soon.

Advertisement.

IWD has a massive portfolio, with more than 700 current holdings. Its top 10 holdings are all well-known, household names and currently comprise 22% of total assets. The top five holdings are Exxon Mobil Corp. (XOM), 2.83%; Berkshire Hathaway Class B (BRK-B), 2.81%; JPMorgan Chase & Co. (JPM), 2.71%; Johnson & Johnson (JNJ), 2.53%; and Wells Fargo (WFC), 2.02%.

For those investors who want the risk and cost benefits associated with smart-beta ETFs, the iShares Russell 1000 Value ETF (IWD) is a very visible choice. The fund also offers the potential for further upside, if the market begins to favor value-oriented sectors again.

share on:

Like This Article?
Now Get Jim's FREE Special Report:
The Top 11 Dividend ETFs to
Buy Right Now

Get up to 5X the yields of traditional income plays.

Get Access to the Report, 100% FREE


img
share on:

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader
LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income PRO (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Options Alert
  • Hi-Tech Trader
LEARN MORE HERE

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • High Velocity Options
  • Intelligence Report
  • Bullseye Stock Trader
  • Eagle Eye Opener
LEARN MORE HERE

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program
LEARN MORE HERE

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Stock of the Week
  • Technical Traders Alert
  • Rapid Profits Stock Trader
LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor
LEARN MORE HERE

George Gilder

George Gilder is the most knowledgeable man in America when it comes to the future of technology and its impact on our lives.  He’s an established investor, bestselling author, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance.

Product Details

  • Technology Report
  • Technology Report PRO
  • Moonshots
  • Private Reserve
  • Millionaire Circle
LEARN MORE HERE

DayTradeSPY

DayTradeSPY was founded by head trader Hugh Grossman, a retired internal auditor for a Fortune 500 company. After years of first-hand experience trying out one trading strategy after another, Hugh instead developed his own trading system centered around day trading SPY options. That’s it... Nothing else.

Product Details

  • Trading Room
  • Pick of the Day
  • Inner Circle
  • Online Workshops
LEARN MORE HERE