NEW YORK (ETF Digest) -- This posting features a comprehensive review of the large-cap ETF sector. In this category, there aren't many more ETFs than just the 9 we've featured given the tsunami of ETF issuance.
Some major issues have been divided into value, growth and blended segments. Nevertheless, to simplify matters for investors, and to be consistent with previous practices, we're still just highlighting what we feel are reasonable top 9 choices. These may be repetitive but we have also featured the leading "value" ETF, an ETF linked to a popular "enhanced" index and various "all-cap" ETFs.
Remember, being the first to market in any sector is most important to issuers and this is much more important in major market sector ETFs like large-caps. In fact, according to Lipper's Jeff Tjornehoj, as of 2012 nearly half of existing ETF assets are found in just two dozen funds with over 1,000 ETFs now issued. The following top 9 issues hold an outsized percentage of these assets.
The issues chosen represent a broad cross section of domestic issues from a variety of sponsors. Most issues are seasoned being issued long ago with substantial assets under management and good liquidity. We're not necessarily recommending one issue over another; rather we're just trying to feature those issues that aren't repetitive. If other choices are available these are mentioned where applicable.Within this sector we have combined choices for growth, value and a blend of these styles. There are occasional periods when value outperforms growth and vice versa; but, even over even intermediate periods they tend to achieve the same total return. Others may disagree about this conclusion citing studies demonstrating superior returns of one to the other. However, most of these experiences are transitory and are driven by various economic conditions including monetary policies and the overall market environment. But, some investors wish to pursue what they believe is a more conservative value approach while others prefer growth both choices are understandable. Again, you are free to choose what suits your own style and objectives best. For those wishing to hedge or speculate ProShares and DirexionShares offer inverse short and leveraged long/short issues. We rank the top 9 ETFs by our proprietary stars system as outlined below. However, given that we're sorting these by both short and intermediate issues we have split the rankings as we move from one classification to another.
Strong established linked index
Excellent consistent performance and index tracking
Low fee structure
Strong portfolio suitability
Established linked index even if "enhanced"
Good performance or more volatile if "enhanced" index
Average to higher fee structure
Good portfolio suitability or more active management if "enhanced" index
Enhanced or seasoned index
Less consistent performance and more volatile
Fees higher than average
Portfolio suitability would need more active trading
Average to below average liquidity
Index is new
Issue is new and needs seasoning
Fees are high
Portfolio suitability also needs seasoning
Liquidity below average We feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short. Some more interested in a fundamental approach may not care so much about technical issues preferring instead to buy when prices are perceived as low and sell for other reasons when high; but, this is not our approach. Premium members to the ETF Digest receive added signals when markets become extended such as DeMark triggers to exit overbought/oversold conditions. For traders and investors wishing to hedge, leveraged and inverse issues are available to utilize from ProShares and Direxion and where available these are noted.
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