ETF Trends
ETF Trends

Considering large caps have outperformed small and mid-cap stocks recently, investors might want to look at "mega-cap" stocks for their exchange traded fund (ETF) portfolio. Megacaps generally have a stock-market value of at least $50 billion. Although their gains are generally smaller than large-cap stocks, mega-cap stocks tend to remain steady through rough market times, according to Eleanor Laise for The Wall Street Journal. Another benefit of mega-cap ETFs is that they tend to charge lower fees than typical ETFs. Some easy ways to access mega-cap stocks include:

  • DIAMONDS Trust, Series 1 (DIA)
  • SPDR DJ Global Titans (DGT)
  • iShares S&P Global 100 Index (OEF)
  • Rydex Russell Top 50 (XLG)

However, be careful to ensure you don’t have overlapping megacaps in your portfolio. This can easily happen because the same huge companies within mega-caps are already within many ETFs. To avoid double exposure, investors might want to trade their traditional ETF that tracks the S&P 500 for one that tracks the S&P 100. In addition, mega-cap ETFs pose the risk that when one stock suffers within the ETF, it can greatly affect the overall ETF’s performance. This is because mega-cap ETFs tend to be more concentrated in top holdings than their broader large-cap competitors.

For full disclosure, some of Tom Lydon’s clients own DIA.

Read the disclosure, as Tom Lydon is a board member of Rydex Investments.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.