Like apple, microsoft, big dividends_ try these smart beta etfs – bitcoin price live

Smart beta etfs come in a variety of strategies, including value, growth, income, dividend yield and dividend growth, fundamentals-weighted and equal-weighted.

Why diversify away from weighting a portfolio by market cap, which is a stock’s price times shares outstanding? Consider QQQ.

The top five holdings of the Q’s are apple ( AAPL ), microsoft ( MSFT ), amazon.Com (AMZN), facebook (FB) and alphabet (GOOGL). Together, they account for more than 39% of the ETF’s total portfolio.

When each of those companies perform well, the fund will have a good year. In 2017, for example, the Q’s are up over 34% year to date through dec. 19. But if apple has a multiyear correction – like it did in 2013 and again in 2016 – the vanilla ETF’s performance could be muted compared with a smart beta ETF that has either avoided apple or rotated out of the stock into a different equity opportunity.Bitcoin price live

A number of smart beta etfs that can provide both an active investment strategy and lower costs, compared with the qs. As a comparison, the expense ratio of the QQQ ETF is 0.2%.

According to ben johnson, director of global ETF research at morningstar, there are two key factors of analyzing smart beta etfs: the fund’s investment process and the fee that the fund charges.

Investors should have a thorough understanding of the ETF’s investment process and how it constructs the portfolio and its weighting. Meanwhile, the fund’s fee should be compared to its actively managed peers and vanilla ETF alternatives.

These two income-producing funds have strong morningstar analyst ratings: vanguard dividend appreciation (VIG) and schwab dividend equity (SCHD).

The morningstar analyst rating measures the quality of the fund within the context of the fund’s objective, benchmark and peer group.Bitcoin price live meanwhile, the fund must distinguish itself across morningstar’s five pillars of investment success: talented management team, sound investment process, portfolio that is in sync with the fund’s process, reasonable expenses and a strong parent organization.

VIG boasts a gold star analyst rating, indicating that morningstar analysts have the highest-conviction recommendation for its investment objective, which seeks to select a diversified portfolio of highly profitable U.S. Dividend-paying companies. In the meantime, the fund reduces exposure to firms with weak fundamentals that may have difficulty sustaining their dividend.

Yielding an annualized 1.9%, its top holdings include consumer products company johnson & johnson (JNJ), tech giant microsoft ( MSFT ) and beverage king pepsico (PEP).Bitcoin price live according to IBD data, the fund’s dividend growth rate is a staunch 20%, compared with the S&P 500’s 13% growth rate.

Year to date, the ETF is up 22%. It carries an expense ratio of 0.08%.

SCHD sports a morningstar silver star analyst rating. Similar to the vanguard fund, the schwab fund looks to focus on equities with strong fundamentals and attractive yields. The fund’s three biggest positions are intel (INTC), verizon communications (VZ) and microsoft. The annual dividend yield is 2.8%.

Year to date, the fund is up 20.9%. Its expense ratio is 0.07%.

According to todd rosenbluth, director of ETF and mutual fund research with CFRA, there are two different types of income-related plays: high-yielding income generation and dividend-paying stocks with growth potential.

On the income-generation side, rosenbluth likes ishares core high dividend (HDV).Bitcoin price live the fund focuses on blue chip energy and telecom names, like exxon mobil (XOM), chevron (CVX), AT&T (T) and verizon, which account for about 30% of the portfolio.

The fund is up 12.9% year to date and has an annualized dividend yield of 3.2%. Its expense ratio is 0.08%.

On the dividend-paying growth side, rosenbluth mentions wisdomtree U.S. Quality dividend growth (DGRW), which yields 1.7%. The design of the dividend-with-growth angle is to participate in some of the market’s upside, while protecting against some of the downside through the income stream.

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Among its top holdings are J&J and apple. The iphone maker is strongly weighted within the portfolio due to its strong fundamental profile – three quarters of accelerating earnings and sales growth – and its solid 1.4% annual dividend.Bitcoin price live

Even though it has a slightly higher expense ratio – coming in at 0.28% – the fund in the past three years has returned an average annual 12.3%, compared with the S&P 500’s 11.3%. Year to date, the fund is up 27.2% vs. The S&P 500’s 22.1% return, according to morningstar direct.


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