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Innovative Large-Cap ETFs
04/01/2015 9:00 am EST
A significant cross section of the investment community has been conditioned to benchmark their large-cap ETF exposure against the SPDR S&P 500—the largest ETF in the world and the most commonly referenced yardstick of equity returns—observes David Fabian, editor of FMD Capital.
Investing in SPDR S&P 500 ETF (SPY) makes sense if you are looking to track the market cap weighted S&P 500 Index. But there is an extensive universe of unique large-cap funds that deserve your attention as well.
Many of these innovative ETFs offer a strong case for targeting a niche style or index methodology that may enhance your returns over the long-term.
Vanguard Growth ETF (VUG)
Growth stocks have significantly outperformed value names over the last five years, which is why VUG is one of the top performing large-cap ETFs in its class.
This fund has $17.5 billion in total assets tracking 371 companies across a variety of sectors.
Conversely, it has very limited exposure to utility, telecom, and basic materials. With a 0.09% expense ratio and diversified basket of holdings, VUG should be considered as a strong SPY alternative for your portfolio as well.
First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW)
For more consistent overall diversification, I recommend the large-cap technology growth theme through First Trust NASDAQ-100 Equal Weighted, which allows for a level distribution of assets across all 100 stocks.
This ETF has a higher expense ratio of 0.60%, yet still offers a compelling basket of high growth stocks to own in a bull market.
PowerShares S&P 500 High Quality Portfolio (SPHQ)
Looking for a way to cherry pick top quality stocks from the S&P 500 Index? SPHQ has done just that by identifying companies with the potential for long-term growth through stability of earnings and dividends.
The end result is a diversified portfolio of 130 stalwart stocks identified by Standard & Poor's that are rebalanced and evaluated quarterly.
The majority of the portfolio is in the industrial and consumer sectors, which makes this fund unique from many of the technology-heavy offerings that dominate this category.
SPHQ has a net expense ratio of 0.29% and over $550 million in total assets.
This ETF has gained 18.67% in annualized total return over the last five years as well.
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