Is iShares MSCI USA Equal Weighted ETF (EUSA) a Strong ETF Right Now?

The iShares MSCI USA Equal Weighted ETF (EUSA) made its debut on 05/05/2010, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Blend category of the market.

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.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination 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

EUSA is managed by Blackrock, and this fund has amassed over $207.76 million, which makes it one of the average sized ETFs in the Style Box - All Cap Blend. Before fees and expenses, this particular fund seeks to match the performance of the MSCI USA Equal Weighted Index.

The MSCI USA Equal Weighted Index represents the MSCI USA Index, measures the performance of equity securities in the top 85% by market capitalization of equity securities listed on stock exchanges in the United States.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Annual operating expenses for this ETF are 0.15%, making it one of the cheaper products in the space.

It's 12-month trailing dividend yield comes in at 1.90%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Looking at individual holdings, Invesco Ltd (IVZ) accounts for about 0.24% of total assets, followed by Boeing (BA) and Zoom Video Communications Inc Clas (ZM).

The top 10 holdings account for about 2.11% of total assets under management.

Performance and Risk

Year-to-date, the iShares MSCI USA Equal Weighted ETF has lost about -10.14% so far, and is down about -3.22% over the last 12 months (as of 07/10/2020). EUSA has traded between $40.33 and $66.29 in this past 52-week period.

The fund has a beta of 1.15 and standard deviation of 23.01% for the trailing three-year period, which makes EUSA a medium risk choice in this particular space. With about 621 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares MSCI USA Equal Weighted 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 SP 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 SP Total U.S. Stock Market ETF has $25.40 billion in assets, Vanguard Total Stock Market ETF has $144.97 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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iShares MSCI USA Equal Weighted ETF (EUSA): ETF Research Reports
 
The Boeing Company (BA) : Free Stock Analysis Report
 
Invesco Ltd. (IVZ) : Free Stock Analysis Report
 
Vanguard Total Stock Market ETF (VTI): ETF Research Reports
 
iShares Core SP Total U.S. Stock Market ETF (ITOT): ETF Research Reports
 
Zoom Video Communications, Inc. (ZM) : Free Stock Analysis Report
 
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