Designed to provide broad exposure to the Style Box - All Cap Blend category of the market, the Franklin U.S. Equity Index ETF (USPX) is a smart beta exchange traded fund launched on 06/01/2016.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Franklin Templeton Investments, and has been able to amass over $1.25 billion, which makes it one of the larger ETFs in the Style Box - All Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the MORNINGSTAR US TARGET MARKET EXPOSURE ID.
The Morningstar US Target Market Exposure Index targets large and mid-capitalization U.S. stocks representing the top 85% of the U.S. equity market by float-adjusted market capitalization.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for this ETF are 0.03%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.21%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 32.20% of the portfolio. Financials and Consumer Discretionary round out the top three.
Taking into account individual holdings, Apple Inc (AAPL) accounts for about 6.58% of the fund's total assets, followed by Nvidia Corp (NVDA) and Microsoft Corp (MSFT).
The top 10 holdings account for about 34.25% of total assets under management.
Performance and Risk
The ETF has gained about 26.94% and is up about 26.48% so far this year and in the past one year (as of 12/30/2024), respectively. USPX has traded between $40.96 and $53.49 during this last 52-week period.
The fund has a beta of 0.89 and standard deviation of 15.97% for the trailing three-year period. With about 571 holdings, it effectively diversifies company-specific risk.
Alternatives
Franklin U.S. Equity Index 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 $64.75 billion in assets, Vanguard Total Stock Market ETF has $457.82 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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Get it free >>Franklin U.S. Equity Index ETF (USPX): ETF Research Reports
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NVIDIA Corporation (NVDA) : 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
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