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Is Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF (GSSC) a Strong ETF Right Now?

A smart beta exchange traded fund, the Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF (GSSC) debuted on 06/28/2017, and offers broad exposure to the Style Box - Small 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.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

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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 sponsored by Goldman Sachs Funds. It has amassed assets over $466.94 million, making it one of the average sized ETFs in the Style Box - Small Cap Blend. Before fees and expenses, this particular fund seeks to match the performance of the Goldman Sachs ActiveBeta U.S. Small Cap Equity Index.

The Goldman Sachs ActiveBeta U.S. Small Cap Equity Index is designed to deliver exposure to equity securities of small capitalization U.S. issuers.

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 0.20%.

GSSC's 12-month trailing dividend yield is 1.41%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Industrials sector - about 19.50% of the portfolio. Financials and Information Technology round out the top three.

When you look at individual holdings, Sep 23 Cme Eminirus2k (RTYU3) accounts for about 1.11% of the fund's total assets, followed by Emcor Group Inc (EME) and Atkore Inc (ATKR).

Performance and Risk

So far this year, GSSC has added about 5.03%, and was up about 6.60% in the last one year (as of 09/19/2023). During this past 52-week period, the fund has traded between $50.18 and $61.36.

The ETF has a beta of 1 and standard deviation of 22.13% for the trailing three-year period. With about 1221 holdings, it effectively diversifies company-specific risk.

Alternatives

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

IShares Russell 2000 ETF (IWM) tracks Russell 2000 Index and the iShares Core S&P Small-Cap ETF (IJR) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $51.27 billion in assets, iShares Core S&P Small-Cap ETF has $68.23 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

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 - Small 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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF (GSSC): ETF Research Reports

EMCOR Group, Inc. (EME) : Free Stock Analysis Report

iShares Russell 2000 ETF (IWM): ETF Research Reports

iShares Core S&P Small-Cap ETF (IJR): ETF Research Reports

Atkore Inc. (ATKR) : Free Stock Analysis Report

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Zacks Investment Research