Today’s selection is a large-cap value fund that is designed to hold 100% equities. Large portfolio positions include Exxon Mobil Corporation (XOM), Bank of America Corporation (BAC), General Electric Company Common (GE), JP Morgan Chase & Co. (JPM), AT&T Inc. (T).
Powershares FTSE RAFI US Portfolio 1000 ETF (PRF)
from The MoneyLetter
Powershares FTSE RAFI US Portfolio 1000 ETF (PRF) is one of the offerings I recommend in my quarterly report “Best ETFs For You,” (See The MoneyLetter November 20 13/First Report).
This ETF seeks to track the performance of the FTSE RAFI US 1000 Index, which, in turn, tracks the performance of the largest US equities chosen on the basis of four fundamental measures: book value, cash flow, sales and dividends.
The 1,000 equities with the highest fundamental strength are weighted by their fundamental scores. The fund and the Index are reconstituted annually.
The Index has outperformed comparable market cap-weighted indexes over the past five years.
Over this time frame, the FTSE RAFI US Index has a compound annual gain of 13.2%, which compares favorably to the 10.5% gain of the Russell 1000 Index and the 10.0% gain of the S&P 500 Index.
As for the PowerShares FTSE RAFI US 1000 Portfolio, its return for the five years is 12.8%. The difference between this return and that of the Index roughly equals the ETF’s management expense ratio of 0.39%. In fact, the tracking error of the ETF is just 0.02%, which is quite good.
My advice: Buy PowerShares FTSE RAFI US 1000 Portfolio for exposure to a fundamentals-weighted index ETF.
James Kedzierski, The MoneyLetter, www.adviceforinvestors.com, 800-804-8846, November 2013, Second Report