How iShares Edge Factors Have Performed So Far | ETF Trends

By Tariq Dennison

  • One of the defining trends in fund investing in the 2010s has been the rise of “smart beta”, providing purer and cheaper tilts from major benchmarks than active funds.
  • Size and value were two of the earliest researched factors, but momentum and low volatility seem to have done better this decade.
  • This article highlights four simple charts comparing the performance of iShares’s “Core” US market ETF vs seven other US market ETFs with defined tilts.

Thirty years ago, it would have been difficult and expensive to invest in a portfolio of stocks defined by a rule as simple as “the cheapest quartile by P/E”, or “the most profitable decile by 10 year ROI”. At that time, your main choices were actively managed mutual funds. If you or your adviser were more forward thinking, you might have had access to one of the first value funds by Vanguard or Dimensional Fund Advisors (DFA).

Even then, you had a choice of either relatively high fees, or relatively shallow exposure to the value factor. Over the past 10 years, investors have been showered with an increasing choice of better ETFs offering purer market exposure at lower cost.

Passive investors have enjoyed fee cuts allowing them to own a market cap weighted portfolio of the total US stock market for as little as 0.03% per year ($3/year per $10,000 invested) via the iShares Core Total US Stock Market ETF (ITOT).

In this article, we show four simple charts comparing how this passive US total market strategy has performed versus seven other low cost “tilts” investors could have taken way from the total market:

Chart #1: Performance of iShares Edge Factors vs Total Market

The first chart simply plots the total return of these seven “tilt” funds compared with the ITOT benchmark since the last of these funds (QUAL) launched in July 2013.

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