Exchange traded funds (ETFs) backed by innovative indexes are becoming more and more popular, not to mention common. The consulting firm VTL Associates LLC is planning to launch 3 new ETFs that follow well-established stock indexes, but then they will re-weight them according to income generated by their underlying companies. These funds are of the revenue weighted category instead of the traditional market value weighted type, and will include a large-cap, mid-cap and small-cap fund.
Ian Salisbury of The Wall Street Journal specifies at this point the funds could be a complicated sell. The market for fundamentally weighted indexes is saturated and this could tilt the investor’s money towards "value" stocks of already established companies, instead of into the faster growing businesses with potential. However, now that many ETFs have specific track records, performance will drive sales as in the case of conventional mutual funds.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.