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Is FlexShares Morningstar U.S. Market Factor Tilt ETF (TILT) a Strong ETF Right Now?

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A smart beta exchange traded fund, the FlexShares Morningstar U.S. Market Factor Tilt ETF (TILT - Free Report) debuted on 09/16/2011, and offers broad exposure to the Style Box - All Cap Blend category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the 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.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

Managed by Flexshares, TILT has amassed assets over $1.58 billion, making it one of the larger ETFs in the Style Box - All Cap Blend. TILT seeks to match the performance of the Morningstar U.S. Market Factor Tilt Index before fees and expenses.

The Morningstar U.S. Market Factor Tilt Index measures the performance of U.S. equity markets with increased exposure toward small-capitalization and value stocks.

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.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.25%.

TILT's 12-month trailing dividend yield is 1.37%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 24.70% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Consumer Discretionary round out the top three.

When you look at individual holdings, Apple Inc Common Stock Usd 0.00001 (AAPL - Free Report) accounts for about 4.64% of the fund's total assets, followed by Microsoft Corp Common Stock Usd 0.00000625 (MSFT - Free Report) and Inc Common Stock Usd 0.01 (AMZN - Free Report) .

Its top 10 holdings account for approximately 20.41% of TILT's total assets under management.

Performance and Risk

The ETF return is roughly 4.71% and was up about 21.42% so far this year and in the past one year (as of 03/06/2024), respectively. TILT has traded between $148.90 and $192.90 during this last 52-week period.

The ETF has a beta of 1.09 and standard deviation of 17.95% for the trailing three-year period, making it a medium risk choice in the space. With about 2031 holdings, it effectively diversifies company-specific risk.


FlexShares Morningstar U.S. Market Factor Tilt 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 $52.72 billion in assets, Vanguard Total Stock Market ETF has $374.48 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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