ETF Trends
ETF Trends

When it comes to exchange traded fund (ETF) investing or otherwise, how much of a guideline are the S&P 500 ETF Ratings?

Equity ETFs are rated by  Standard & Poor’s, but some advisors are questioning whether such information is useful.

The ratings, which started two months ago, consider whether a fund is overweight, market weight or underweight — essentially buy, hold or sell recommendations — based on a number of factors, including S&P’s research into the fund’s underlying holdings, reports David Hoffman for Investment News. The approach that S&P takes rivals those of Morningstar and Fitch.

The usefulness of such information incorporated into a rating varies from one advisor to another. Ratings that look at the underlying stock holdings of equity ETFs — ratings that can be used as buy or sell recommendations — may be very useful to those advisors looking for guidance concerning allocation.

S&P offers data and analysis on 5,000 publicly held U.S. corporations. Morningstar also rates ETFs and began doing so in March 2006. Their ratings allow investors to compare an ETF to traditional funds and is a quantitative assessment of past performance.

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.