Is it possible to build a better exchange traded fund (ETF) with indexes? WisdomTree is working to do just that, with their ETF family based upon fundamental indexes rather than the traditional market cap-weighted method.
WisdomTree Pacific ex-Japan Total Dividend Fund (DND) uses the MSCI Pacific ex-Japan Index as its benchmark. These two indexes use different guidelines in determining which companies to include. The MSCI is the traditional market cap-weighted method, favoring widely known, high-value companies, explains Saibel Saha for The Motley Fool. The WisdomTree index includes companies only paying regular cash dividends. The focus is on earnings and companies paying hard cash to investors on an annual basis. Mature, slow-growing companies are usually the types that fit the criteria. DND goes after the growth and good business fundamentals.
Since its inception, DND has returned 87%, while the MSCI index returned 79% in the same period. The WisdomTree ETFs are just over a year old, so whether DND can continue to outperform its benchmark remains to be seen. As for cost and returns, it had a winning first year.
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.