Each week, I scan the ETF marketplace to identify the top ideas across multiple segments of the market that present opportunities you should be aware of for the coming week. These are just a few of the top ideas that are available to ETF Focus subscribers.
The Smart Beta ETF Idea
If there's one thing that the ETF marketplace does well, it's finding all sorts of different index weighting strategies. Traditional market-cap weighting is still the most popular method, but there are also options that EQUAL-WEIGHT, VOLATILITY-WEIGHT, REVENUE-WEIGHT and DIVIDEND-WEIGHT. A five-month old ETF from Exponential ETFs adds another idea to the list.
The Reverse Cap Weighted U.S. Large Cap ETF (RVRS) is just what it sounds like. It takes the S&P 500 and gives the heaviest weightings to the index's smallest components. Envision Healthcare (EVHC) is the fund's largest holding with 1.11% of assets. Apple's weighting in the fund? A mere 0.005%.
The fund is an interesting idea, even though it still has only $4 million in assets. The appeal of equal-weighted funds is that it tilts more towards smaller companies within a given index. Since smaller companies generally outperform larger ones over time, equal-weighting should similarly do better than cap-weighting. RVRS takes it one step further. Targeting the smallest companies within a large-cap index adds another layer of size tilting without delving full on into mid-cap or small-cap funds. Make no mistake, the fund still has the feel of a mid-cap fund, but, according to ETFdb.com, RVRS still has about 40% of assets in large-caps, making it a nice balanced mix between the two groups.
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