Stocks & Commodities V. 35:01 (28–29): ETF Sector Investing by Leslie N. Masonson

ETF Sector Investing by Leslie N. Masonson

One of the more recent ETF innovations over the past decade has been the introduction of factors to enhance performance and minimize risk compared to the more traditional market-capitalization weighting approach. A factor is simply a characteristic of a security that has demonstrated an ability to provide an equal to or better than average return with lower risk. As a precursor to factor-based ETFs, Morningstar introduced its equity style in 2000 which consisted of nine boxes with large, medium, and small-cap stocks labeled on the vertical axis, and value, blend, and growth labeled on the horizontal axis. Stocks were placed in one of these nine boxes and their performance was compared ...