Pay Attention to Earnings-Based ETFs

Speaking casually, the WisdomTree product line generally has delivered the goods in the short time frame it has operated. I've even integrated several of WisdomTree's narrower funds into client accounts. I'm convinced that these funds are worthy of further study by investors who use broad-based products in their own accounts. I believe that if you watch these for a few months, at least one or two of them will prove themselves to be better mousetraps than some of the old standbys.

Know Your Composition

There are some composition issues to be aware of. Remember that the driver for inclusion is the last four quarters of reported earnings. If one area of the market is doing especially well, that area is likely to have a large weighting in all the funds.

For now, that means energy is heavy in all the funds. Energy comprises roughly 10% of the S&P 500 but ranges from 13% to 21% in the four larger-cap funds. It has only mid-single-digit representation in the small- and mid-cap funds.

Over time, the sector makeup is likely to change. That means you'll need to check the holdings every so often.

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Please note that due to factors including low market capitalization and/or insufficient public float, we consider WisdomTree Total Earnings Fund, WisdomTree Earnings 500 Fund, WisdomTree MidCap Earnings Fund, WisdomTree Small Cap Earnings Fund, WisdomTree Earnings Top 100 Fund, Wisdom Tree Low P/E Fund, WisdomTree Dividend 100 Fund and SmallCap Dividend Fund to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

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