In an attempt to make up for the potential risks of a traditional market capitalization weighting methodology, a smart beta exchange traded fund could help investors to enhance returns and diminish risks ahead.

For example, the Oppenheimer Large Cap Revenue ETF (NYSEArca: RWL) is a strategy comprised of the same securities as the S&P 500 index, except the fund’s securities are ranked by top line revenue. Components are then rebalanced every quarter to keep the Revenue-Weighted indices in line with the companies’ most recently reported revenue levels.

Revenue weighting could provide diversified exposure to the market, is not influenced by stock price, reflects a truer indication of a company’s value and offers stable sector exposure. Moreover, revenue weighting may provide a more value-oriented portfolio and historically outperformed in a value-driven market while showing lower drawdowns during growth-driven markets.

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