- How did you initially select the funds to evaluate?
- What did you learn about the funds you chose after inputting them in the comparison fund tool?
I'll answer the first two questions together. Sorry for the long post.
I spent a lot of time on this exercise, like days. First I went to the ETF Guide to start narrowing down my selections. I was interested in picking the Mid Cap ETF portion of my portfolio, more specifically a Mid Cap Blend Index. I have never been able to decide if I am a value or growth investor. The grain that runs through me is "value" on anything purchased in life but it is not so dominant in my investing arena that it would steer me to just one style or philosophy. So that led me to the Mid Cap blend category.
I also tilt heavily on true index funds so first I had to decide which index? I decided on S&P 400 since it does not overlap with the S&P 500 and has plenty of information available on it. I also understand it better than other indexes.
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How did you initially select the funds to evaluate?
I went to the Top/Bottom ETF screen, The A+ ETF Screener, and the Compare ETFs page. Somewhat in that order.
On the Top/Bottom screen I sorted on Midcap Blend for the TOP of the screen and found there were only three.
I plugged the three into the compare screen and looked at the ETF Fact Sheet for each. I selected only one as a "maybe", XMHQ since the other two were either tied to an index other than the S&P 400 or strays from just investing domestically in the S&P 400.
I screened on Midcaps Performing Well Compared to Peers for the last 5yrs.
The screen was interesting. Of the 20 ETFs returned, nine were blends, nine were value, and two were growth. This gave me a little confidence boost that by choosing mid cap blends I wouldn't be sacrificing too much in returns by Not trying to pick the winner between growth and value ETFs.
Also, another noteworthy result is that one of the ETFs showed up on both lists - XMHQ.
I then compared the five blends from that screen that were tracking the S&P 400 index (my index of choice). I chose Vanguard's IVOO as the benchmark since it is basically invested 100% in the S&P 400 stocks at the same weight. IVOO itself beats the average Mid Cap ETFs so it is definitely a big contender in my mind.
The results weren't too varied in returns which makes sense because they are all tracking the same index within the same category. But two made it to the top of the list for me.
IVOO - Mid Cap Blend
Pros:
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It is a true index fund of S&P 400.
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Does well against its peers 6 out of the last 10 yrs.
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It has all 404 holdings of the S&P 400.
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It has a low expense ratio of .10
Cons:
XMHQ - Mid Cap Blend
Pros:
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It has below average risk and some of the highest 3 yr, 5 yr, and 10 yr returns.
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In a down market it has only lost more to the averages once in the last 10 yrs. Although it does not track the entirety of the S&P 400 it invests in what the company considers "Quality" stock.
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It has a R-Square of 88%
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The ETF has 81 holdings. These are stocks that the company deems quality. Based on the returns over the years I'm thinking they may be right.
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It has beaten its peers 5 out of the last 10yrs.
Con:
I then ran the Consistent Performer screen. There was only one Mid Cap Blend ETF listed and to no-one's surprise it was XMHQ.
I also ran a comparison of the S&P 400 index fund against the indexes created by fund family ETF managers themselves just to see if I was handicapping myself by only looking at the S&P 400. There was nothing shocking in the results so I'll stay in the S&P 400 arena.
I also ran mid cap Blend Vs Growth and Blend Vs Value comparison.
Neither of the two Growth Mid Caps followed the S&P 400 close enough for me and there was no compelling reason to pick either of these two ETFs.
The Blend vs Value comparison was a little more productive. One more ETF showed up for me to consider.
IVOV - Value Index ETF, It beats IVOO 5 out of the last 10 yrs.
Pros:
Has better 3yr, 5yr, 10 yr returns than IVOO although the 10 yr return is only .1% more.
Con:
It's beaten its peers only 4 out of 10 yrs
Has a higher total risk 1.51
It's not a blend ETF which puts me in a position to pick the winning investment style.
It does stay within the S&P 400.
3. What criteria did you focus on the most when comparing the funds side-by-side?
Mid Cap Blend in the S&P 400 arena
Better than average it's peers in expense ratio.
Better returns than it's peers for 3yr, 5yr, 10yr return related to its peers.
Total risk and category risk.
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RICHARD
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Original Message:
Sent: 03-17-2022 16:35
From: Jenna Brashear
Subject: Selecting and Managing Your Investments - Lesson 3
Finding a Fund: Where to Start
Reflect
Finding the right mutual fund or ETF for your portfolio doesn't have to be overly difficult. At AAII, we aim to make this choice as simple as possible by providing our members with countless resources and tools to find the best fund fit. We've compiled a checklist of every AAII resource we offer on our website for investors to utilize. We have everything from comparison tools to help analyze multiple funds, top and bottom performing fund lists, fund screening tools where you can use predefined criteria or create your own, our comprehensive mutual fund guide that is updated monthly and so much more.
Take a look at the full checklist that is attached at the bottom of this lesson!
Participate
Knowing where to start can be the hardest part of finding the right funds for your portfolio. Now that you have a comprehensive list of tools and resources to use, we want to hear how you've used them. For this lesson, we challenge our members to use our comparison funds tool as well as our Investing Ideas section to choose 2-4 funds to evaluate.
For this activity, please review the attached checklist PDF and complete these two tasks:
- Take 2-4 mutual funds or ETFs to evaluate. You can find these buy using the Funds+ or ETF+ screener or any of the lists in the Investing Ideas section.
- Visit our Comparison Fund Tool, input those 2-4 funds in the search bar (make sure to separate the fund tickers with commas)
Now, we want to hear about your findings!
- How did you initially select the funds to evaluate?
- What did you learn about the funds you chose after inputting them in the comparison fund tool?
- What criteria did you focus on the most when comparing the funds side-by-side?
If you found funds you'd like to add to your portfolio, you can easily add to AAII's My Portfolio if you have A+ Investor or Platinum. You can also write these funds down on your "S" - Selecting and Managing Your Investments worksheet.
Discussion Example
- I went to the top/bottom performing ETFs list located in the Investing Ideas section on the AAII website. For this example, I chose the top three ETFs that fell in the mid-cap category with A or B grade for 5-year return. Those tickers were: ARKK, SYLD, ETHO, FAD
- I found that when comparing these four mid-cap sized ETFs, ARKK did not have a good short-term return and had an increased risk index compared to the other three ETFs I compared.
- I looked at turnover and risk index the most when comparing these four ETFs side-by-side.
View and download the "Selecting and Managing Your Investments" worksheet
Questions about coursework, webinars, worksheets, etc.? Drop your inquiries in the discussion below. We're happy to help!
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Jenna Brashear
AAII Community Manager
Chicago, IL
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