The expansion of the ETF universe continues to foster innovation as the growing product lineup offers investors numerous instruments for addressing their investment goals. In fact, with over 1,400+ ETPs to choose from, investors likely have multiple ways of accessing a particular asset class. As with any financial instrument, with innovation also comes complexity; as such, investors should remember to take a good hard look under the hood before jumping into a position because seemingly similar products often bear noteworthy differences.
With more than a handful of Growth and Value ETFs to choose from, some investors may be intimated by the sheer number of seemingly identical products. As always, remember that the devil is in the details [see 101 ETF Lessons Every Financial Advisor Should Learn].
Growth vs. Value
When it comes to equity exposure, investors have embraced the cost-efficient ETF structure as the preferred vehicle for rounding out their portfolios’ stock component. Breaking up the universe of equities into growth and value companies has long been a traditional approach for those looking to focus on a particular corner of the market. As such, the ETF universe has also grown to distinguish stocks based on fundamental criteria, allowing investors a simple way to employ an investment strategy that may have previously been too costly or complex to implement on their own [also check Dividend.com's Money Management Tips Center].
The table below highlights the difference in performances across five ETFs offering exposure to the same corner of the market:
- SPDR S&P 500 (SPY, A)
- S&P 500 Growth Index Fund (IVW, A)
- S&P 500 Pure Growth Fund (RPG, B+)
- S&P 500 Value Index Fund (IVE, B+)
- S&P 500 Pure Value Fund (RPV, C+)
The Rydex “Pure” ETFs follow the same indexes as the iShares offerings, but while iShares has a portfolio of cheaper products with more holdings, the Rydex ETFs take a much stricter screening approach and create a more expensive, but also consistently stronger-performing, funds. Of course, there’s no universally right choice from the above ETFs; investors should take the time to investigate each fund individually before investing.
Disclosure: No positions at time of writing.
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- Guide to ETF Index Weightings