ETFs 101: A Look at Indexing Methodologies
For instance, the underlying benchmark index may focus on factors like public company filings relative to frequency of trades, changes in holdings of company insiders and earnings analysis based on company returns.
Companies like Direxion, Guggenheim Investments, iShares, Russell Investments and WisdomTree are carving out market share in this new investment category.
Potential investors should be aware of how these funds operate before diving in. For instance, the frequency at which the funds rebalance will affect the returns on the securities – some indices are reconstituted on a monthly basis, while others may be quarterly, semiannually or once a year.
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