Exchange Traded Funds (ETFs)

ETF Talk: Weighing in the Broadening Market

As I’m sure is obvious by now, the market has been experiencing a major shift as of late. Several political, economic and consumer factors have caused the market to lose the attraction it showed last year for mega-cap technology stocks that previously dominated it.

Now, while this is a huge shift, it doesn’t have to be a bad one. We are entering what appears to be a broadening market, one where several sectors are experiencing strong earnings growth instead of just a select few. And, as with many market shifts, we can play this to our advantage.

One of the best ways to capitalize on the broadening market is through the Invesco Russell 1000 Equal Weight ETF (EQAL). In an equal weight exchange-traded fund (ETF) such as EQAL, each sector represented receives equal weight, and each stock within said sectors also receives equal weight.

EQAL specifically offers an equal-weighted take on the Russell 1000, which consists of the 1,000 largest U.S. stocks. This approach produces a big tilt away from the mega-cap stocks and toward the mid-cap and smaller stocks.

EQAL has $611.98 million in assets under management and an expense ratio of 0.20%. It’s also rebalanced annually. Its top holdings include AT&T Inc (NYSE: T), Liberty Broadband Corp. (NASDAQ: LBRDK), Roku, Inc. (NASDAQ: ROKU), Iridium Communications Inc. (NASDAQ: IRDM), Verizon Communications Inc. (NYSE: VZ) and Juniper Networks, Inc. (NYSE: JNPR).

Chart courtesy of Stockcharts.com.

The fund fell 3.41% for the last month, 1.45% in the past three months and 1.45% year to date.

Anyone interested in a fund should consider its holdings and purpose to ensure it fits one’s goals and personal risk tolerance before buying any new investment. That process is part of the due diligence that should be performed before adding any stock, fund or ETF to one’s portfolio.

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As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Forecasts & Strategies, Tactical Trader, TNT Trader, Five Star Trader, Bullseye Stock Trader, and The Deep Woods. His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.