What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
Because the fund has amassed over $343.42 M, this makes it one of the larger ETFs in the Style Box – All Cap Value. FDVV is managed by Fidelity. FDVV seeks to match the performance of the Fidelity Core Dividend Index before fees and expenses.
The Fidelity Core Dividend Index is designed to reflect the performance of stocks of large and mid-capitalization dividend-paying companies that are expected to continue to pay and grow their dividends.
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.
Annual operating expenses for this ETF are 0.29%, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 3.03%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund’s holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Microsoft Corp (MSFT) accounts for about 3.28% of the fund’s total assets, followed by Procter + Gamble Co/the (PG) and Jpmorgan Chase + Co (JPM).
The top 10 holdings account for about 26.41% of total assets under management.
Performance and Risk
So far this year, FDVV has gained about 10.81%, and was up about 4.97% in the last one year (as of 06/19/2019). During this past 52-week period, the fund has traded between $26 and $31.10.
The fund has a beta of 0.85 and standard deviation of 10.90% for the trailing three-year period. With about 135 holdings, it effectively diversifies company-specific risk.
Fidelity High Dividend ETF is a reasonable option for investors seeking to outperform the Style Box – All Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
Invesco High Yield Equity Dividend Achievers ETF (PEY) tracks NASDAQ US Dividend Achievers 50 Index and the iShares Core S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Invesco High Yield Equity Dividend Achievers ETF has $831.34 M in assets, iShares Core S&P U.S. Value ETF has $5.55 B. PEY has an expense ratio of 0.54% and IUSV charges 0.04%.
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 Value.
The Fidelity High Dividend ETF (FDVV) was trading at $29.90 per share on Wednesday afternoon, up $0.04 (+0.13%). Year-to-date, FDVV has gained 5.12%, versus a 10.12% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of Yahoo! Finance .