As indexes have been essentially transformed into investable assets in part because of surging interest in ETFs, many advisors and investors have begun to take a closer look at the details of the methodologies behind the construction and maintenance of these benchmarks. Cap weighting, where the largest weights are afforded to the largest companies, has remained by far the most popular option–thanks in no small part to the low costs and low maintenance requirements associated with this approach. But alternative weighting strategies have been growing in popularity as well, emerging as opportunities to generate excess returns by simply tweaking the manner in which weights are assigned to individual securities [see also The Ten Commandments of Commodity Investing]. There has been a significant amount of debate on the merits of these weighting methodologies, including at a panel last month at the Inside ETFs Conference presented by Index Universe. Many view the [...] Click here to read the original article on ETFdb.com. Related Posts: RSP vs. SPY: 2011 At a Glance Ten Unexpected Observations On YTD ETF Returns UBS Launches Risk On / Risk Off ETNs 25 Things Every Financial Advisor Should Know About ETFs Report: Guggenheim To Rebrand Rydex ETFs
As indexes have been essentially transformed into investable assets in part because of surging interest in ETFs, many advisors and investors have begun to take a closer look at the details of the methodologies behind the construction and maintenance of these benchmarks. Cap weighting, where the largest weights are afforded to the largest companies, has remained by far the most popular option–thanks in no small part to the low costs and low maintenance requirements associated with this approach. But alternative weighting strategies have been growing in popularity as well, emerging as opportunities to generate excess returns by simply tweaking the manner in which weights are assigned to individual securities [see also The Ten Commandments of Commodity Investing]. There has been a significant amount of debate on the merits of these weighting methodologies, including at a panel last month at the Inside ETFs Conference presented by Index Universe. Many view the [...]
Click here to read the original article on ETFdb.com.
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