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Is WisdomTree U.S. Multifactor ETF (USMF) a Strong ETF Right Now?

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The WisdomTree U.S. Multifactor ETF (USMF - Free Report) was launched on 06/29/2017, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - All Cap Blend category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is managed by Wisdomtree. USMF has been able to amass assets over $208.45 million, making it one of the average sized ETFs in the Style Box - All Cap Blend. Before fees and expenses, USMF seeks to match the performance of the WisdomTree U.S. Multifactor Index.

The WisdomTree U.S. Multifactor Index is comprised of 200 U.S. companies with the highest composite scores based on two fundamental factors, value and quality measures, and two technical factors, momentum and correlation.

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.28%.

It has a 12-month trailing dividend yield of 1.54%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

For USMF, it has heaviest allocation in the Information Technology sector --about 28.60% of the portfolio --while Healthcare and Consumer Discretionary round out the top three.

Taking into account individual holdings, Jack Henry & Associates Inc (JKHY - Free Report) accounts for about 1.48% of the fund's total assets, followed by Verizon Communications Inc (VZ - Free Report) and Omnicom Group Inc (OMC - Free Report) .

Its top 10 holdings account for approximately 13.12% of USMF's total assets under management.

Performance and Risk

The ETF has lost about -9.22% and is down about -2% so far this year and in the past one year (as of 05/11/2022), respectively. USMF has traded between $37.95 and $42.22 during this last 52-week period.

The fund has a beta of 0.92 and standard deviation of 21.94% for the trailing three-year period. With about 198 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. Multifactor ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core S&P Total U.S. Stock Market ETF (ITOT - Free Report) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI - Free Report) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $39.14 billion in assets, Vanguard Total Stock Market ETF has $254.28 billion. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Blend.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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