Are Your Cap-Weighted ETFs Leaders Or Laggards?
The rapid growth of the ETF industry in recent years has altered the investment landscape in more ways than one. The low expense ratios offered by most exchange-traded products have brought increased scrutiny on active managers and called into question their ability to add value to client portfolios. The immediate diversification offered by a basket of securities has caused some to shift away from the complex research associated with individual stock picking towards more macro analysis required for tactical strategies. And as indexes have evolved from hypothetical measures of performance to essentially investable assets, the methodologies utilized in the construction and maintenance of benchmarks have become increasingly important to investors [see our database of ETF indexes]. The first generation of equity ETFs was dominated by market capitalization-weighted strategies, a methodology that involves assigning a weight to each component based on the total value of its equity. Most of the assets in [...] Click here to read the original article on ETFdb.com. Related Stories: Weighting Methodologies: An ETF Report Card Revenue Weighted ETFs Continue Impressive Run Revenue-Weighted ETFs: A New Twist On an Old Drink
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