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

A smart beta exchange traded fund, the iShares MSCI USA Equal Weighted ETF (EUSA) debuted on 05/05/2010, and offers broad exposure to the Style Box - All Cap Blend category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

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.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is managed by Blackrock, and has been able to amass over $221.09 million, which makes it one of the average sized ETFs in the Style Box - All Cap Blend. This particular fund seeks to match the performance of the MSCI USA Equal Weighted Index before fees and expenses.

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

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Operating expenses on an annual basis are 0.15% for this ETF, which makes it one of the cheaper products in the space.

It's 12-month trailing dividend yield comes in at 1.86%.

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.

EUSA's heaviest allocation is in the Information Technology sector, which is about 18.10% of the portfolio. Its Financials and Industrials round out the top three.

Taking into account individual holdings, Charles Schwab Corp (SCHW) accounts for about 0.33% of the fund's total assets, followed by Morgan Stanley (MS) and Zoom Video Communications Inc Clas (ZM).

Its top 10 holdings account for approximately 2.42% of EUSA's total assets under management.

Performance and Risk

Year-to-date, the iShares MSCI USA Equal Weighted ETF has lost about -2.71% so far, and was up about 2.97% over the last 12 months (as of 10/30/2020). EUSA has traded between $40.33 and $66.29 in this past 52-week period.

The ETF has a beta of 1.12 and standard deviation of 23.54% for the trailing three-year period, making it a medium risk choice in the space. With about 623 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 $26.96 billion in assets, Vanguard Total Stock Market ETF has $161.82 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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iShares MSCI USA Equal Weighted ETF (EUSA): ETF Research Reports
 
The Charles Schwab Corporation (SCHW) : Free Stock Analysis Report
 
Morgan Stanley (MS) : 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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