This type of indexing relies on playing by rules, says Elizabeth Trotta for Smart Money. These ETFs tend to do well in markets that are consistently moving up or down. In choppy markets, though, they’re not as easy to pin down.
The first level of enhanced indexing looks at fundamental characteristics such as book value, cash flow, earnings and dividends.
Below is a list of a few quant ETFs and their performance against the S&P 500.
|ETF||Inception Date||Total Return Since Inception Thru 12/31/07||Total Return S&P 500 Thru 12/31/07|
|PowerShares Dynamic Large Cap Value Portfolio (PWV)||3/3/05||41.5%||21.3%|
|PowerShares Dynamic Industrials Sector Portfolio (PRN)||10/12/06||20.6%||7.7%|
|Claymore/Zacks Sector Rotation Portfolio (XRO)||9/21/06||30.9%||12.9%|
|Claymore/Sabrient Insider ETF (NFO)||9/21/06||18.8%||12.9%|
As with any ETF, use caution and have a strategy. Just because these funds in the long-term have outperformed the S&P 500 doesn’t mean that they always will. A simple strategy we use is trend following, which you can read about here.
For more stories on ETFs, visit our ETF 101 category.
Sumin Kim contributed to this article.