Is WisdomTree U.S. Multifactor ETF (USMF) a Strong ETF Right Now?
Designed to provide broad exposure to the Style Box - All Cap Blend category of the market, the WisdomTree U.S. Multifactor ETF (USMF) is a smart beta exchange traded fund launched on 06/29/2017.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by Wisdomtree. USMF has been able to amass assets over $301.71 million, making it one of the average sized ETFs in the Style Box - All Cap Blend. USMF, before fees and expenses, seeks to match the performance of the WisdomTree U.S. Multifactor Index.
The WisdomTree U.S. Multifactor Index is comprised of 200 U.S. companies with the highest composite scores based on two fundamental factors, value and quality measures, and two technical factors, momentum and correlation.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.28%, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 1.31%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
USMF's heaviest allocation is in the Information Technology sector, which is about 29.10% of the portfolio. Its Financials and Healthcare round out the top three.
Looking at individual holdings, International Business Machines Corp (IBM) accounts for about 1.40% of total assets, followed by Verisign Inc (VRSN) and Motorola Solutions Inc (MSI).
The top 10 holdings account for about 12.91% of total assets under management.
Performance and Risk
So far this year, USMF return is roughly 8.55%, and was up about 21.56% in the last one year (as of 06/13/2024). During this past 52-week period, the fund has traded between $36.99 and $46.56.
USMF has a beta of 0.90 and standard deviation of 14.65% for the trailing three-year period. With about 200 holdings, it effectively diversifies company-specific risk.
Alternatives
WisdomTree U.S. Multifactor ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&P Total U.S. Stock Market ETF (ITOT) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $56.33 billion in assets, Vanguard Total Stock Market ETF has $404.77 billion. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Blend.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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WisdomTree U.S. Multifactor ETF (USMF): ETF Research Reports
International Business Machines Corporation (IBM) : Free Stock Analysis Report
VeriSign, Inc. (VRSN) : Free Stock Analysis Report
Motorola Solutions, Inc. (MSI) : Free Stock Analysis Report
Vanguard Total Stock Market ETF (VTI): ETF Research Reports
iShares Core S&P Total U.S. Stock Market ETF (ITOT): ETF Research Reports
