Is iShares MSCI USA Equal Weighted ETF (EUSA) a Strong ETF Right Now?

Making its debut on 05/05/2010, smart beta exchange traded fund iShares MSCI USA Equal Weighted ETF (EUSA) provides investors broad exposure to the Style Box - All 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.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

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.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

EUSA is managed by Blackrock, and this fund has amassed over $330.07 M, which makes it one of the average sized ETFs in the Style Box - All Cap Blend. This particular fund seeks to match the performance of the MSCI USA Equal Weighted Index before fees and expenses.

The MSCI USA Equal Weighted Index represents the MSCI USA Index, measures the performance of equity securities in the top 85% by market capitalization of equity securities listed on stock exchanges in the United States.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Operating expenses on an annual basis are 0.15% for this ETF, which makes it one of the cheaper products in the space.

The fund has a 12-month trailing dividend yield of 1.55%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

Representing 15.20% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Industrials round out the top three.

When you look at individual holdings, Global Payments Inc (GPN) accounts for about 0.32% of the fund's total assets, followed by Docusign Inc (DOCU) and Target Corp (TGT).

EUSA's top 10 holdings account for about 2.14% of its total assets under management.

Performance and Risk

The ETF has added about 21.61% so far this year and was up about 10.42% in the last one year (as of 10/23/2019). In the past 52-week period, it has traded between $47.02 and $60.88.

The fund has a beta of 1.07 and standard deviation of 12.48% for the trailing three-year period, which makes EUSA a medium risk choice in this particular space. With about 641 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares MSCI USA Equal Weighted 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) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $23.01 B in assets, Vanguard Total Stock Market ETF has $123.19 B. 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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iShares MSCI USA Equal Weighted ETF (EUSA): ETF Research Reports
 
Vanguard Total Stock Market ETF (VTI): ETF Research Reports
 
iShares Core S&P Total U.S. Stock Market ETF (ITOT): ETF Research Reports
 
Target Corporation (TGT) : Free Stock Analysis Report
 
Global Payments Inc. (GPN) : Free Stock Analysis Report
 
DocuSign Inc. (DOCU) : Free Stock Analysis Report
 
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