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Is ALPS Equal Sector Weight ETF (EQL) a Strong ETF Right Now?
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A smart beta exchange traded fund, the ALPS Equal Sector Weight ETF (EQL - Free Report) debuted on 07/07/2009, and offers broad exposure to the Style Box - Large Cap Blend category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Alps, and has been able to amass over $327.21 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Blend. EQL seeks to match the performance of the NYSE Select Sector Equal Weight Index before fees and expenses.
The NYSE Equal Sector Weight Index comprises of all active Select Sector SPDR ETFs in an equal weighted portfolio. These sector includes Consumer Discretionary, Consumer Staples, Materials, Energy, Technology, Utilities, Financial, Industrial, Health Care & Real Estate.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for this ETF are 0.27%, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 2.18%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Communication Services Select Sector Spdr Fund (XLC - Free Report) accounts for about 9.50% of total assets, followed by Financial Select Sector Spdr Fund (XLF - Free Report) and Energy Select Sector Spdr Fund (XLE - Free Report) .
Its top 10 holdings account for approximately 91.28% of EQL's total assets under management.
Performance and Risk
The ETF has added about 2.67% and is down about -3.37% so far this year and in the past one year (as of 03/01/2023), respectively. EQL has traded between $88.15 and $110.23 during this last 52-week period.
The fund has a beta of 0.95 and standard deviation of 23.91% for the trailing three-year period, which makes EQL a medium risk choice in this particular space. With about 12 holdings, it has more concentrated exposure than peers.
Alternatives
ALPS Equal Sector Weight ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Core S&P 500 ETF (IVV - Free Report) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY - Free Report) tracks S&P 500 Index. IShares Core S&P 500 ETF has $297.32 billion in assets, SPDR S&P 500 ETF has $361.66 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.
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 - Large 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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Is ALPS Equal Sector Weight ETF (EQL) a Strong ETF Right Now?
A smart beta exchange traded fund, the ALPS Equal Sector Weight ETF (EQL - Free Report) debuted on 07/07/2009, and offers broad exposure to the Style Box - Large Cap Blend category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Alps, and has been able to amass over $327.21 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Blend. EQL seeks to match the performance of the NYSE Select Sector Equal Weight Index before fees and expenses.
The NYSE Equal Sector Weight Index comprises of all active Select Sector SPDR ETFs in an equal weighted portfolio. These sector includes Consumer Discretionary, Consumer Staples, Materials, Energy, Technology, Utilities, Financial, Industrial, Health Care & Real Estate.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for this ETF are 0.27%, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 2.18%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Communication Services Select Sector Spdr Fund (XLC - Free Report) accounts for about 9.50% of total assets, followed by Financial Select Sector Spdr Fund (XLF - Free Report) and Energy Select Sector Spdr Fund (XLE - Free Report) .
Its top 10 holdings account for approximately 91.28% of EQL's total assets under management.
Performance and Risk
The ETF has added about 2.67% and is down about -3.37% so far this year and in the past one year (as of 03/01/2023), respectively. EQL has traded between $88.15 and $110.23 during this last 52-week period.
The fund has a beta of 0.95 and standard deviation of 23.91% for the trailing three-year period, which makes EQL a medium risk choice in this particular space. With about 12 holdings, it has more concentrated exposure than peers.
Alternatives
ALPS Equal Sector Weight ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Core S&P 500 ETF (IVV - Free Report) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY - Free Report) tracks S&P 500 Index. IShares Core S&P 500 ETF has $297.32 billion in assets, SPDR S&P 500 ETF has $361.66 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.
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 - Large 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.